What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-02-19 compared with 2020-03-16 · 392 added, 619 removed, 205 unchanged (83% of the section changed)

5 unchanged sentences

For information about these risks and uncertainties, refer to the section entitled “Forward-Looking Statements” and the section entitled “Item 1A.

– Risk Factors .”

We conduct operations in over 80 countries and have service and sales locations in virtually all of the major oil and natural gas producing regions in the world.

Our operational performance is reviewed on a geographic basis, and we report the following as separate, distinct reporting segments:

Western Hemisphere and Eastern Hemisphere.

– Risk Factors.” As described in “Note 1 – Summary of Significant Accounting Policies” references to “Predecessor” relate to the Consolidated Statements of Operations for the period from January 1, 2019 through and including the adjustments from the application of Fresh Start Accounting on December 13, 2019 and for the year ended December 31, 2018 (“Predecessor Periods”).

References to “Successor” relate to the Consolidated Statements of Operations for the year ended December 31, 2020 and for the period from December 14, 2019 through December 31, 2019 (“2020 Successor Period and 2019 Successor Period”, respectively) and are not comparable to the Consolidated Financial Statements of the Predecessor Periods as indicated by the “Black line” division in the financials and footnote tables, which emphasizes the lack of comparability between amounts presented.

References and comparisons to results for the year ended December 31, 2019 relate to the combined Successor and Predecessor Period (“2019 Combined Period”) as the 18 days of the Successor Period is not a significant period of time impacting the combined results.

We conduct operations in over 75 countries and have service and sales locations in oil and natural gas producing regions globally.

Our operational performance is reviewed on a geographic basis, and we report the Western Hemisphere and Eastern Hemisphere as separate, distinct reporting segments.

Our principal business is to provide equipment and services to the oil and natural gas exploration and production industry, both onshore and offshore.

Products and services include:

(1) Production, (2) Completions, (3) Drilling and Evaluation and (4) Well Construction.

Production offers production optimization services and a complete production ecosystem, featuring our artificial-lift portfolio, testing and flow-measurement solutions, and optimization software, to boost productivity and profitability.

Completions is a suite of modern completion products, reservoir stimulation designs, and engineering capabilities that isolate zones and unlock reserves in deepwater, unconventional, and aging reservoirs.

Drilling and Evaluation comprises a suite of services ranging from early well planning to reservoir management.

Our two product lines are as follows:

(1) Completion and Production and (2) Drilling, Evaluation and Intervention.

• Completion and Production offers production optimization services and a complete production ecosystem, featuring our artificial-lift portfolio, testing and flow-measurement solutions, and optimization software, to boost productivity and profitability.

In addition, we have a suite of modern completion products, reservoir stimulation designs, and engineering capabilities that isolate zones and unlock reserves in deepwater, unconventional, and aging reservoirs.

• Drilling, Evaluation and Intervention comprises a suite of services ranging from early well planning to reservoir management.

The drilling services offer innovative tools and expert engineering to increase efficiency and maximize reservoir exposure.

The evaluation services merge wellsite capabilities including wireline, logging while drilling, and surface logging with laboratory-fluid and core analyses to reduce reservoir uncertainty.

On April 30, 2019, we completed the sale of our laboratory services and surface data logging businesses for an aggregate consideration of $256 million.

Well Construction builds or rebuilds well integrity for the full life cycle of the well.

Using conventional to advanced equipment, we offer safe and efficient tubular running services in any environment.

Our skilled fishing and re-entry teams execute under any contingency from drilling to abandonment, and our drilling tools provide reliable pressure control even in extreme wellbores.

We also included our land drilling rig business as part of Well Construction.

We divested a majority of our land drilling rig operations during 2019 and in the fourth quarter of 2018.

We may sell our products and services separately or may bundle them together to provide integrated solutions up to, and including, integrated well construction where we are responsible for the entire process of drilling, constructing and completing a well.

Our customers include both exploration and production companies and other oilfield service companies.

Depending on the service line, customer and location, our contracts vary in their terms, provisions and indemnities.

We earn revenues under our contracts when products are delivered and services are performed.

Typically, we provide products and services at a well site where our personnel and equipment may be located together with personnel and equipment of our customer and third parties, such as other service providers.

Our services are usually short-term in nature, day-rate based and cancellable should our customer wish to alter the scope of work.

Consequently, our backlog of firm orders is not material to the Company.

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Emergence from Bankruptcy Proceedings

On July 1, 2019, the Weatherford Parties commenced the Cases under Chapter 11 of the United States Bankruptcy Code in the U.S.

Bankruptcy Court for the Southern District of Texas.

On September 9, 2019, the Company filed with the Bankruptcy Court the proposed Second Amended Joint Prepackaged Plan of Reorganization of Weatherford International plc and its Affiliate Weatherford Parties.

On September 11, 2019, the Bankruptcy Court entered a Confirmation Order confirming and approving the Plan.

On December 13, 2019, the conditions to effectiveness of the Plan were satisfied and the Company emerged from Chapter 11, including, but not limited to, the effectiveness of the schemes of arrangement in Ireland and Bermuda.

The Company filed a notice of the Effective Date of the Plan with the Bankruptcy Court on December 13, 2019 (the “Notice of Effective Date”).

See “ Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings ” and “ Note 3 – Fresh Start Accounting ” for additional details on bankruptcy emergence.

On the Effective Date, we adopted and applied the relevant guidance with respect to the accounting and financial reporting for entities that have emerged from bankruptcy proceedings, or “Fresh Start Accounting.” Under Fresh Start Accounting, our balance sheet on the Effective Date reflects all of our assets and liabilities at fair value.

Our emergence from bankruptcy and the adoption of Fresh Start Accounting resulted in a new reporting entity, referred to herein as the “Successor,” for financial reporting purposes.

To facilitate discussion and analysis of our financial condition and results of operations herein, we refer to the reorganized Weatherford Parties as the Successor for periods subsequent to December 13, 2019 and as the “Predecessor” for periods on or prior to December 13, 2019.

As a result of the adoption of Fresh Start Accounting and the effects of the implementation of the Plan, our consolidated financial statements subsequent to December 13, 2019 may not be comparable to our consolidated financial statements on or prior to December 13, 2019, and as such, “black-line” financial statements are presented to distinguish between the Predecessor and Successor companies.

References to the year ended December 31, 2019 relate to the combined Successor Predecessor Periods for the year ended December 31, 2019.

Industry Trends

The level of spending in the energy industry is heavily influenced by the current and expected future prices of oil and natural gas.

Changes in expenditures result in an increased or decreased demand for our products and services.

The Rig Count is an indicator of the level of spending for the exploration for and production of oil and natural gas reserves.

The following chart sets forth certain statistics that reflect historical market conditions:

Henry Hub Gas (b)

Rig Count (c)

International Rig

Price per barrel of West Texas Intermediate (“WTI”) crude oil as of the last business day of the year indicated at Cushing Oklahoma – Source:

Thomson Reuters

Price per MM/BTU as of the last business day of the year indicated at Henry Hub Louisiana – Source:

Thomson Reuters

Average Rig Count – Source:

Baker Hughes Rig Count

During 2019 oil prices ranged from a low of $46.54 per barrel during early-January, to a high of $66.30 per barrel in late April and averaged $56.82 per barrel in the fourth quarter of 2019.

Natural gas ranged from a high of $3.59 MM/BTU during mid-January to a low of $2.07 MM/BTU in early-August and averaged $2.41 MM/BTU in the fourth quarter of 2019.

Factors influencing oil and natural gas prices during the period include hydrocarbon inventory levels, realized and expected global economic growth, realized and expected levels of hydrocarbon demand, level of production capacity and weather and geopolitical uncertainty.

Recent developments have created significant uncertainty on the industry’s trajectory for 2020.

The global impacts surrounding the COVID-19 pandemic, including operational and manufacturing disruptions, logistical constraints and travel restrictions, are rapidly evolving and increasingly dynamic.

We may experience delays or a lack of availability of key components from our suppliers, customer restrictions that would prevent access to their sites, community measures to contain the spread of the virus,

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changes to Weatherford’s policies that may restrict our employees, and other actions that may negatively impact our ability to operate.

Further, recent actions by certain members of OPEC and its partners have also disrupted the supply/demand equation, resulting in commodity price weakness and reductions to the capital spending plans of our customers.

The COVID-19 pandemic and the recent customer responses to OPEC initiatives have resulted in weaker demand for our products and services.

These events have had a significant impact on our outlook and may constrain our ability to generate revenues, profits, cash flows and may affect our liquidity profile.

The WTI crude oil on the last business day of the 2019 year closed at $61.06 per barrel and during the second week of trading in March 2020 the price per barrel had fallen to the low $30’s per barrel.

We were already taking a number of actions which were yielding improvements in our cost structure as we entered the year.

However, given current developments, we are now implementing more aggressive actions to right-size our business to address current market conditions.

Despite this challenging outlook, we are committed to improving our profitability and free cash flow in 2020.

We are embedding a returns-focused mindset into our organization and this, alongside continued cost-reduction efforts and the non-recurrence of costs associated with our financial restructuring, will assist in achieving our profit and cash flow objectives.

In the fourth quarter of 2017, we launched a program (“Transformation Program”) focused on increasing our revenue, profitability, and cash flows by improving operations across the company, including flattening our organizational structure, implementing process changes, enhancing our supply chain, and rationalizing our manufacturing footprint.

The improvements from the Transformation Program were impacted by the adverse market conditions and our voluntary Chapter 11 bankruptcy filing in 2019, and the original timeline to generate targeted savings is expected to take longer than originally anticipated.

Going forward, we will continue to focus on improving our operations and these efforts will include workforce reductions, facility consolidations, and other cost efficiency initiatives across all of our geographic regions.

We continually seek opportunities to maximize efficiency and value through various transactions, including purchases or dispositions of assets, businesses, investments or joint ventures based on the strategic fit within our business and/or our short and long-term objectives.

On April 30, 2019, we completed the sale of our laboratory services and surface data logging businesses for an aggregate consideration of $256 million.

We divested a majority of our land drilling rig operations in the fourth quarter of 2018 and during 2019 for consideration of $288 million.

The oilfield services industry growth is highly dependent on many external factors, such as our customers’ capital expenditures, world economic and political conditions, the price of oil and natural gas, member-country quota compliance within the Organization of Petroleum Exporting Countries and weather conditions and other factors, including those described in the section entitled “Forward-Looking Statements” and the section entitled “ Item 1A.

– Risk Factors .”

Opportunities and Challenges

As production decline rates persist and reservoir productivity complexities increase, our customers will continue to face challenges in balancing the cost of extraction activities with securing desired rates of production while achieving acceptable rates of return on investment.

These challenges increase our customers’ requirements for technologies that improve productivity and efficiency, which in turn puts pressure on us to deliver our products and services at competitive rates.

We believe we are well positioned to satisfy our customers’ needs, but the level of improvement in our businesses in the future will depend heavily on pricing, volume of work, and our ability to offer solutions to more efficiently extract hydrocarbons, control costs, and penetrate new and existing markets with our newly developed technologies.

While our industry offers many opportunities, there were significant challenges that materialized throughout 2019, including but not limited to slower collections from customers, pressure from suppliers to shorten payment terms or lower credit limits and increased inventory balances resulting from a disruption in deliveries as we went through the Chapter 11 bankruptcy process.

As we have emerged successfully from the bankruptcy process we anticipate that our new capital structure will help alleviate many of these aforementioned issues.

Our challenges also include adverse market conditions that could make our targeted cost reduction benefits more difficult to obtain and the ability to recruit and retain employees problematic.

Continued negative sentiment for the energy industry in the capital markets may impact demand for our products and services, as our customers, particularly those in North America, may face challenges securing appropriate amounts of capital under suitable terms to finance their operations.

The cyclicality of the energy industry continues to impact the demand for our products and services, such as our drilling and evaluation services, well construction and well completion services, which strongly depend on the level of exploration and development activity and the completion phase of the well life cycle.

Other products and services, such as our production optimization and artificial lift systems,

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are dependent on the number of wells and the type of production systems used.

We are following our long-term strategy aimed at achieving profitability in our businesses, servicing our customers, and creating value for our stakeholders.

Our long-term success will be determined by our ability to manage effectively the cyclicality of our industry, including the ongoing and prolonged industry downturn, our ability to respond to industry demands and periods of over-supply or low oil prices, and ultimately to generate consistent positive cash flow and positive returns on the invested capital.

During bankruptcy proceedings our non-debtor affiliates that did not file voluntary petitions continued to operate their businesses and facilities without disruption to customers, vendors, partners or employees.

Vendors and other unsecured creditors who continued to work with the non-debtor affiliates on existing terms were paid in full and in the ordinary course of business.

All existing customer and vendor contracts remained in place and were serviced in the ordinary course of business.

On emergence from bankruptcy our lower leverage ratio and debt levels should enable us to capture additional market share.

There is no assurance, however, that we will be able to execute on our strategies or achieve the intended benefits.

Recent Developments

Bankruptcy and Fresh Start Accounting

On July 1, 2019 , Weatherford Ireland, Weatherford International Ltd.

(“Weatherford Bermuda”), and Weatherford International, LLC (“Weatherford Delaware”) (collectively, “Weatherford Parties”), filed voluntary petitions under Chapter 11 of the Bankruptcy Code in the U.S.

Bankruptcy Court for the Southern District of Texas.

On September 11, 2019 the Plan, as amended, was confirmed by the Bankruptcy Court and on December 13, 2019 (“Effective Date or Fresh Start Reporting Date”) we emerged from bankruptcy after successfully completing the reorganization pursuant to the Plan.

The Consolidated Financial Statements included herein have been prepared as if we were a going concern and in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No.

852 – Reorganizations (“ASC 852”).

See “ Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings ” and “ Note 3 – Fresh Start Accounting ” for additional details regarding the bankruptcy.

As a result, during bankruptcy we segregated liabilities and obligations whose treatment and satisfaction were dependent on the outcome of the Chapter 11 proceedings and classified these items as “ Liabilities Subject to Compromise ” on our Consolidated Financial Statements with respect to the Predecessor as shown in “ Note 3 – Fresh Start Accounting ”.

In addition, we have classified all income, expenses, gains or losses that were incurred or realized as a result of the Chapter 11 proceedings as “ Reorganization Items ” in our Consolidated Statements of Operations .

In accordance with ASC 852, we adopted fresh start accounting (“Fresh Start Accounting”) upon emergence from Chapter 11, at which point we became a new entity for financial reporting because (i) the holders of the then existing ordinary shares of the Predecessor company received less than 50% of the new ordinary shares of the Successor company outstanding upon emergence and (ii) the reorganization value of the Company’s assets immediately prior to confirmation of the Plan was less than the total of all post-petition liabilities and allowed claims.

Upon adoption of Fresh Start Accounting, the reorganization value derived from the range of enterprise value as disclosed in the Disclosure Statement associated with the Plan, as adjusted for the revised projections filed with the SEC on a Form 8-K on October 7 and October 16, 2019, was allocated to the Company’s assets and liabilities based on their fair values (except for deferred income taxes) in accordance with ASC 805 – Business Combinations.

The amount of deferred income taxes to be recorded was determined in accordance with ASC 740 – Income Taxes.

The Effective Date fair values of the Company’s assets and liabilities may differ materially from their recorded values as reflected on the historical balance sheet.

Financial Results and Overview

References to the year ended December 31, 2019 relate to the combined Successor Predecessor Periods for the year ended December 31, 2019.

There was continued weakness within the energy market during 2019, particularly in North America, with price uncertainty in WTI crude, lower rig counts, and reduced spending by customers.

This was combined with an uncertain economic and political situation in Argentina, leading to a reduction in activity.

These factors were offset by activity growth in the Middle East as well as improvements in Europe and Russia.

While an improved product mix, favorable exchange rates and cost savings contributed to improvements in our operations during 2019, we incurred significant reorganization expenses as part of our voluntary reorganization under Chapter 11 and made significant cash investments in working capital.

Combined revenues in 2019 compared to 2018 decreased $529 million , or 9% , which was predominantly driven by lower activity levels in Canada, lower demand for services in the United States, uncertainty related to economic conditions and customer

The evaluation services merge wellsite capabilities including wireline and managed pressure drilling.

We also build or rebuild well integrity for the full life cycle of the well.

Using conventional to advanced

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budget reductions in Argentina, as well as decreased revenues associated with the divested land drilling rigs, laboratory services and surface logging businesses.

equipment, we offer safe and efficient tubular running services in any environment.

Our skilled fishing and re-entry teams execute under any contingency from drilling to abandonment, and our drilling tools provide reliable pressure control even in extreme wellbores.

Financial Results Overview

Successor revenues totaled $3.7 billion in 2020, a decrease of $1.5 billion, or 29%, compared to the 2019 Combined Period revenues, as the unprecedented global health and economic crisis sparked by the COVID-19 pandemic negatively impacted industry activity.

Our revenue decline was predominantly driven by lower activity levels in North America as a result of lower demand for our products and services in the United States, but was also impacted by declines in activity internationally, primarily in Latin America, the Middle East, North Africa and Russia.

Successor consolidated operating loss of $1.5 billion worsened $305 million, or 26%, in 2020 compared to the 2019 Combined Period consolidated operating loss of $1.2 billion.

The higher operating loss in 2020 primarily reflects the decline in business demand due to the COVID-19 pandemic, long-lived asset impairment charges, goodwill impairment, and inventory charges, partially offset by the lower retention expenses and cost savings from our various restructuring activities.

Successor segment operating income was $55 million in 2020, a decrease of $139 million, compared to the 2019 Combined Period.

The decrease was driven primarily by the decline in demand for our products and services as a result of the COVID-19 pandemic and additional expense of COVID-19 protocols, partially offset by our lower cost structure.

Revenues in the 2019 Combined Period compared to 2018 decreased $529 million, or 9%, which was predominantly driven by lower activity levels in Canada, lower demand for our products and services in the United States, uncertainty related to economic conditions and customer budget reductions in Argentina, as well as decreased revenues associated with the divested land drilling rigs, laboratory services and surface logging businesses.

This decline was partially offset by increased activity in the Middle East and higher service activity in Russia and the North Sea.

Excluding the impact of revenues from the divested portion of the land drilling rigs, laboratory services and surface logging businesses, consolidated revenues were down $166 million , or 3% in 2019 compared to 2018.

Combined consolidated operating results improved $903 million , or 43% in 2019 compared to 2018 while combined segment operating income declined $133 million , or 41% in 2019 compared to 2018.

The 2019 improvement in combined consolidated operating results was primarily due to lower goodwill impairment charges in 2019 compared to 2018.

The combined segment operating income declined due to the reduced activity in North America and an unfavorable product mix in Canada and the United States.

Excluding the impact of revenues from the portion of the divested businesses, consolidated revenues were down $166 million, or 3% in 2019 Combined Period compared to 2018.

Consolidated operating results improved $903 million, or 43% in the 2019 Combined Period compared to 2018 while segment operating income declined $133 million, or 41% in the 2019 Combined Period compared to 2018.

The improvement in the 2019 Combined Period consolidated operating results was primarily due to lower goodwill impairment charges and the net gain on sale of businesses.

The segment operating income in the 2019 Combined Period declined due to the reduced activity in North America and an unfavorable product mix in Canada and the United States.

Lower demand for our products and services coupled with an unfavorable product mix and lack of supply chain savings caused the expected benefits from our cost reduction initiatives to slow and consequently resulted in significantly lower actual results compared to our expectations during 2019.

These declines were partially offset by higher integrated service project activity in Latin America and operational improvements in the Eastern Hemisphere as a result of a more favorable geographic and product mix.

Excluding the impact of operating results from the divested portion of the land drilling rigs, laboratory services and surface logging businesses, segment operating results in 2019 declined $55 million compared to 2018.

On April 30, 2019, we completed the sale of our surface data logging business to Excellence Logging for $50 million in total consideration, subject to customary post-closing working capital adjustments.

The business disposition included our surface data logging equipment, technology and associated contracts related to the business.

On April 30, 2019, we completed the sale of our Reservoir Solutions business, also known as our laboratory services business to Oil & Gas Labs, LLC, an affiliate of CSL Capital Management, L.P., for an aggregate purchase price of $206 million in cash, subject to escrow release and customary post-closing working capital adjustments.

We divested a majority of our land drilling rig operations during the year ended 2019 as well as in the fourth quarter of 2018.

In the fourth quarter of 2018, we completed the sale of a portion of the land drilling rigs operations we previously committed to divesting in the fourth quarter of 2017 and received gross cash proceeds of $216 million .

The sale represented two of a series of four closings pursuant to the purchase and sale agreements entered into with ADES in July of 2018 to sell our land drilling rig operations in Algeria, Kuwait and Saudi Arabia, as well as two idle land rigs in Iraq.

The sale was for 31 land rigs and related drilling contracts, as well as the transfer of employees and contract personnel, for an aggregate purchase price of $288 million , subject to customary closing conditions and adjustments based on working capital, net cash, loss or destruction of rigs and drilling contract backlog.

In the first quarter of 2019, we completed the final closings in a series of closings pursuant to the purchase and sale agreements entered into with ADES and received gross proceeds of $72 million.

In the first quarter of 2018, we completed the sale of our continuous sucker rod service business in Canada for a purchase price of $25 million and recognized a gain of $2 million.

The carrying amounts of the major classes of assets divested total $23 million and included PP&E, allocated goodwill and inventory.

In the third quarter of 2018, we completed the sale of an equity investment in a joint venture for an insignificant gain.

In December of 2017, we completed the sale of our U.S.

pressure pumping and pump-down perforating assets for $430 million in cash and recognized a $96 million gain on this sale.

We sold our related facilities, field assets, and supplier and customer contracts related to these businesses.

Proceeds from the sale were used to reduce outstanding indebtedness.

Summary of Significant Charges and Credits

For the Successor year ended December 31, 2020, significant charges incurred totaled $1.2 billion and included $814 million of long-lived asset impairments, $239 million of goodwill impairments, $138 million of inventory charges and $45 million in other charges.

In addition, we had $206 million of restructuring charges.

Reorganization items in the 2019 Predecessor Period directly related to bankruptcy include the $4.3 billion gain on settlement of liabilities subject to compromise, $1.4 billion gain on revaluation of the Company’s assets and liabilities, and $346 million of charges for debt issuance write-offs, debt discount write-offs, backstop commitment fees, DIP financing fees and professional fees related to bankruptcy matters.

In addition, we incurred $86 million of prepetition charges for professional and other fees related to the Cases incurred before the petition date.

For the Predecessor Period, we recorded $730 million of goodwill impairment charges related to our fair value assessment of our reporting units, $189 million of severance and restructuring charges and $374 million of inventory write-off, long-lived asset impairments, asset write-downs and other charges.

For the 2019 Predecessor Period, significant charges incurred totaled $1.1 billion and included $730 million of goodwill impairment, $237 million in asset write-downs and rigs related and other charges, $117 million of inventory charges and $20 million of long-lived asset impairments.

In addition, we had $189 million of restructuring charges.

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For the year ended December 31, 2018, we recorded $1.9 billion of goodwill impairment charges related to our annual fair value assessment of our business and assets, $151 million of long-lived asset impairments, $126 million of severance and restructuring charges and $87 million of other asset write-downs.

For the year ended December 31, 2017, we incurred $928 million of long-lived asset impairments, $540 million inventory write-off and other related charges including excess and obsolete, $230 million in the write-down of Venezuelan receivables and $183 million of severance and restructuring charges.

For the year ended December 31, 2018, significant charges incurred totaled $2.2 billion and included $1.9 billion of goodwill impairment, $151 million of long-lived asset impairments and $87 million in other charges.

In addition, we had $126 million of restructuring charges.

Please refer to more details as discussed in “Note 3 – Fresh Start Accounting” and “Note 4 – Impairments and Other Charges.”

Goodwill and Long-lived Asset Impairments

During 2019, we determined that goodwill for all our reporting units in the Western Hemisphere and Eastern Hemisphere was fully impaired and as a result we incurred a goodwill impairment charge of $730 million .

The impairment indicators during 2019 were a result of lower activity levels and lower exploration and production capital spending that resulted in a decline in drilling activity and growth in all our reporting units.

Our lower than expected and forecasted financial results were due to the continued weakness within the energy market which impacted our ability to meet the original timeline of our revenue and profitability improvement efforts under our restructuring over the past two years, defined in “ Note 11 – Restructuring, Facility Consolidation and Severance Charges ”.

These circumstances prompted us to evaluate whether circumstances in the Predecessor Period had changed that would more likely than not reduce the fair value of one or more of our reporting units below their carrying amount.

When conducting this evaluation, we considered macroeconomic and industry conditions, including the outlook for exploration and production spending by our customers and overall financial performance of each of our reporting units.

We also considered whether there were any changes in our long-term forecasts, which are impacted by assumptions about the future commodity pricing and supply and demand for our goods and services.

During the Predecessor Period in 2019, we recognized long-lived asset impairments of $20 million to write-down our assets to the lower of carrying amount or fair value less cost to sell for our land drilling rigs.

We had asset write-downs of $91 million for assets where there was low or no demand.

The unprecedented global economic and industry conditions resulting from the decline in demand and impact from the COVID-19 pandemic were identified as goodwill and long-lived asset impairment indicators.

As a result, we performed impairment assessments quarterly in 2020 through analysis of the undiscounted cash flow of our asset groups, which include property, plant and equipment, definite-lived intangible assets, goodwill and right of use assets.

As of March 31, 2020, and as of June 30, 2020, we identified that impairment occurred in certain asset groups and with the assistance of third-party valuation advisors we determined the fair value of those asset groups.

Based on our impairment tests, we determined the carrying amount of certain long-lived asset groups and reporting units exceeded their respective fair values and we recognized $814 million of long-lived asset impairments and $239 million of goodwill impairment in our Middle East & North Africa (“MENA”) and Russia, Turkmenistan and Kazakhstan (“Russia”) reporting units in “Impairments and Other Charges” on the accompanying Consolidated Statements of Operations during the year ended December 31, 2020.

The $239 million of goodwill in our MENA and Russia reporting units was established in the 2019 Successor Period upon emergence from bankruptcy as part of Fresh Start.

However in the 2019 Predecessor period, we determined that goodwill for all our reporting units in the Western Hemisphere and Eastern Hemisphere was fully impaired and we incurred a goodwill impairment charge of $730 million.

The 2019 Predecessor Period impairment indicators were a result of lower activity levels and lower exploration and production capital spending in our reporting units.

Our lower forecasted financial results were due to the continued weakness within the energy market which impacted our ability to meet the original timeline of our revenue and profitability improvement efforts under our restructuring over the past two years, defined in “Note 12 – Restructuring Charges”.

During the 2019 Predecessor Period, we recognized long-lived asset impairments of $20 million to write-down our assets to the lower of carrying amount or fair value less cost to sell for our land drilling rigs.

During 2018, we recorded a goodwill impairment of $1.9 billion which was based upon our annual fair value assessment of our business and assets.

The rapid and steep decline in oil prices and consequentially lower expectations for future exploration and production capital spending, resulted in a sharp reduction in share prices in the oilfield services sector, including our share price, which triggered the goodwill impairment.

During 2018, we also recognized long-lived asset impairments of $151 million related to our land drilling rigs assets primarily to write-down our land drilling rigs assets to the lower of carrying amount or fair value less cost to sell.

The 2018 impairments were due to the sustained downturn in the oil and gas industry that resulted in a reassessment of our disposal groups for our land drilling rigs.

During 2018, we also recognized long-lived asset impairments of $151 million to write-down our land drilling rigs assets.

The 2018 impairments were due to the sustained downturn in the oil and gas industry that resulted in a reassessment of our disposal groups.

The change in our expectations of the market’s recovery, in addition to successive negative operating cash flows in certain disposal asset groups represented an indicator that those assets will no longer be recoverable over their remaining useful lives.

During 2017, we recognized long-lived asset impairments of $928 million , of which $923 million was related to property, plant and equipment (“PP&E”) impairments and $5 million was related to the impairment of intangible assets.

The PP&E impairments include a $740 million write-down to the lower of carrying amount or fair value less cost to sell of our land drilling rigs classified as held for sale, $172 million related to segment product line assets and $11 million of long-lived impairments charges related to Corporate assets.

The 2017 impairments were due to the sustained downturn in the oil and gas industry, whose recovery was not as strong as expected and whose recovery in subsequent quarters was slower than had previously been anticipated.

The change in the expectations of the market’s recovery, in addition to successive negative operating cash flows in certain asset groups represented an indicator that those assets will no longer be recoverable over their remaining useful lives.

See “ Note 9 – Long-Lived Asset Impairments and Asset Write-Downs ,” “ Note 10 – Goodwill and Intangible Assets ” and “ Note 15 – Fair Value of Financial Instruments, Assets and Other Assets ” for additional information regarding goodwill and long-lived asset impairments.

See “Note 10 – Long-Lived Asset Impairments,” “Note 11 – Goodwill and Intangible Assets” and “Note 15 – Fair Value of Financial Instruments, Assets and Other Assets” for additional information regarding goodwill and long-lived asset impairments.

Business Outlook

The COVID-19 pandemic, customer activity shutdowns, travel constraints and access restrictions to customer work locations caused significant uncertainty for the global economy, resulting in the significant decline in the global demand for oil and gas.

The impacts of the COVID-19 pandemic together with uncertainty around the extent and timing for an economic recovery, caused extreme market volatility for commodity prices and resulted in significant reductions to the capital spending during 2020 of our primary customer base, with lowering expectations of oil and gas related spending into 2021 and beyond.

We continue to closely monitor the global impacts surrounding the COVID-19 pandemic, including operational and manufacturing disruptions, logistical constraints and travel restrictions.

We have experienced and expect to continue to experience delays or a lack of availability of key components from our suppliers, shipping and other logistical delays and disruptions, customer restrictions that prevent access to their sites, community measures to contain the spread of the virus, and changes to Weatherford’s policies that have both restricted and changed the way our employees work.

We expect most, if not all, of these disruptions and constraints will continue to effect how we and our customers and suppliers work in the future.

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We continuously improve crew rotations and management practices to minimize our employees’ exposure to COVID-19 while at client facilities.

Our identification and management of COVID-19 cases evolve with the latest guidance through the development of updated protocols, advanced testing and response procedures.

Faced with these challenges, we evolved our digital portfolio and enhanced our applications to offer fully-integrated digital oilfield solutions.

We also increased our offerings of automated well construction and remote monitoring and predictive analytics related to our production offerings.

Oil prices have risen recently, buoyed by recent supply-led Organization of Petroleum Exporting Countries (“OPEC”) and other high oil exporting non-OPEC nations (“OPEC+”) policy, the ongoing COVID-19 vaccine rollout, and multinational economic stimulus actions which is providing a runway for a meaningful oil demand recovery throughout 2021.

We continue to anticipate multi-year dislocation across the industry, particularly in North America, Europe, Latin America and Sub Saharan Africa.

We continue to anticipate constraints on our ability to generate and grow our revenues, profits and cash flows given the global economic uncertainty.

We implemented, and will continue to implement, aggressive actions to right-size our business to address current market conditions, including:

• Cost reductions across all our operations, as well as our global support structure to match our reduced size;

• Consolidation of geographic and product line structures to better align with market conditions.

The oilfield services industry growth is highly dependent on many external factors, such as the global response to the COVID-19 pandemic, our customers’ capital expenditures, world economic and political conditions, the price of oil and natural gas, member-country quota compliance within the OPEC and weather conditions and other factors, including those described in the section entitled “Forward-Looking Statements” and the section entitled “Item 1A.

– Risk Factors.”

Industry Trends

The level of spending in the energy industry is heavily influenced by the current and expected future prices of oil and natural gas.

Changes in expenditures result in an increased or decreased demand for our products and services.

Rig count is an indicator of the level of spending for the exploration for and production of oil and natural gas reserves.

The following charts set forth certain statistics that reflect historical market conditions.

The table below shows the average oil and natural gas prices for West Texas Intermediate (“WTI”) and Henry Hub natural gas during years ended December 31, 2020, 2019 and 2018.

Commodity prices decreased during 2020 following the dual impact of the COVID-19 pandemic and the inability of OPEC and OPEC+ nations to agree on production cuts.

12/31/2020 12/31/2019 12/31/2018

Oil price - WTI (1)

$39.23 $56.98 $64.94

Natural Gas price - Henry Hub (2)

$2.04 $2.57 $3.17

(1) Oil price measured in dollars per barrel (rounded to the nearest dollar)

(2) Natural gas price measured in dollars per million British thermal units (Btu), or MMBtu

The historical average rig counts based on the weekly Baker Hughes Company rig count information were as follows:

12/31/2020 12/31/2019 12/31/2018

North America 522 1,077 1,223

International 825 1,098 988

Worldwide 1,347 2,175 2,211

As of December 31, 2020, the North America and International Rig Count totaled 410 and 665, respectively.

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Table of Contents Item 7 | MD&A

Global demand for oil dropped precipitously from January through April of 2020 due to numerous different factors, but primarily including the expansion of the COVID-19 coronavirus outbreak, as governments around the world responded with lockdowns, resulting in significantly reduced travel.

Global stocks of crude and refined products increased as oil supply could not respond quickly enough to balance the market.

These factors contributed to the resulting precipitous decline in commodity prices, rising oil and gas inventory levels, decreased realized and expected levels of oil and gas demand, decreased level of production capacity and geopolitical uncertainty.

During the second half of 2020, the OPEC-led supply alliance agreed to production limits, which stabilized and improved oil prices.

Opportunities and Challenges

As production decline rates persist and reservoir productivity complexities increase, our customers continue to face challenges in balancing the cost of extraction activities with securing desired rates of production while achieving acceptable rates of return on investment.

In addition, as consolidation of the oil and gas services industry continues due to market conditions, there has been an increased demand for companies with specialized products, services and technologies.

We believe we are well positioned to satisfy our customers’ needs, but the level of improvement in our businesses in the future will depend heavily on pricing, volume of work, and our ability to offer solutions to more efficiently extract oil and gas, control costs, and penetrate new and existing markets with our newly developed technologies.

Over the long-term, we expect the world’s demand for energy will rise from current levels requiring increased oil field services and more advanced technology from the oilfield service industry.

We remain focused on delivering innovative and cost-efficient solutions for customers to assist them in achieving their operational, safety and environmental objectives.

Our challenges also include adverse market conditions that could make our targeted cost reduction benefits more difficult to recruit new and retain existing employees.

Oil prices have risen recently, buoyed by recent supply-led OPEC+ policy, the ongoing COVID-19 vaccine rollout, and multinational economic stimulus actions which is providing a runway for a meaningful oil demand recovery throughout 2021.

We continue to anticipate a multi-year dislocation across the industry, particularly in North America, Europe, Latin America and Sub Saharan Africa.

In addition, continued negative sentiment for the energy industry in the capital markets has impacted, and may continue to impact, demand for our products and services, as our customers, particularly those in North America, have experienced and likely will continue to experience challenges securing appropriate amounts of capital under suitable terms to finance their operations.

The cyclicality of the energy industry and the COVID-19 pandemic continues to impact the demand for our products and services which strongly depend on the level of exploration and development activity and the completion phase of the well life cycle or on the number of wells and the type of production systems used.

We are following our long-term strategy aimed at achieving profitability in our businesses, servicing our customers and creating value for our shareholders.

Our long-term success will be determined by our ability to manage effectively the cyclicality of our industry, including the ongoing and prolonged industry downturn, our ability to respond to industry demands and periods of over-supply or uncertain oil prices, and ultimately to generate consistent positive cash flow and positive returns on the invested capital.

Exchange Listing

The delisting of our ordinary shares from the New York Stock Exchange (“NYSE”) became effective on April 27, 2020.

Our ordinary shares were deregistered under Section 12(b) of the Exchange Act on July 16, 2020.

We continue to evaluate listing options and intend to relist our ordinary shares when our Board of Directors determines market conditions are appropriate.

The Company intends to continue filing periodic reports with the Securities and Exchange Commission (“SEC”) on a voluntary basis.

Our ordinary shares continue to trade on the OTC Pink Marketplace under the ticker symbol “WFTLF”.

2019 Emergence from Bankruptcy Proceedings and Fresh Start Accounting

On July 1, 2019 (the “Petition Date”), Weatherford and two of our subsidiaries (collectively, the “Weatherford Parties” ) commenced voluntary reorganization proceedings (the “Cases”), including under Chapter 11 of Title 11 (“Chapter 11”) of the United States Bankruptcy Code in the U.S.

Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”), with ancillary proceedings filed in Ireland and Bermuda.

The plan of reorganization (as amended, the “Plan”), together with the schemes of arrangement in Ireland and Bermuda, became effective on December 13, 2019 (the “Effective Date”) and the Weatherford Parties emerged from Chapter 11.

Upon emergence from Chapter 11, we adopted fresh start accounting (“Fresh Start Accounting”).

For additional details regarding the Chapter 11, see “Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings” and “Note 3 – Fresh Start Accounting”.

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Table of Contents Item 7 | MD&A

The amount of deferred income taxes to be recorded was determined in accordance with ASC 740 – Income Taxes.

The Effective Date fair values of the Company’s assets and liabilities differ materially from their recorded values as reflected on the historical balance sheet.

Under Fresh Start Accounting, our balance sheet on the Effective Date reflected all our assets and liabilities at fair value.

Our emergence from bankruptcy and the adoption of Fresh Start Accounting resulted in a new reporting entity, referred to herein as the “Successor,” for financial reporting purposes.

To facilitate discussion and analysis of our financial condition and results of operations, we refer to the reorganized Weatherford Parties as the Successor for periods subsequent to December 13, 2019 and as the “Predecessor” for periods on or prior to December 13, 2019.

As a result of the adoption of Fresh Start Accounting and the effects of the implementation of the Plan, our consolidated financial statements subsequent to December 13, 2019 are not comparable to our consolidated financial statements on or prior to December 13, 2019, and as such, “Black-line” financial statements are presented to distinguish between the Predecessor and Successor companies.

References to “Successor” relate to the Consolidated Statements of Operations for the year ended December 31, 2020 and from December 14, 2019 through December 31, 2019 (“Successor Periods”).

References to the year ended December 31, 2019 relate to the combined Successor and Predecessor Periods for the year ended December 31, 2019.

Debt Transactions and Equity Issuances

On August 28, 2020, we completed a series of financing transactions that meaningfully enhanced our liquidity, including issuing $500 million of 8.75% Senior Secured Notes (“Senior Secured Notes”), terminating our ABL Credit Agreement, and amending and increasing the size of our senior secured letter of credit agreement (the “LC Credit Agreement”) to $215 million.

See “Note 14 – Borrowings and Other Debt Obligations” for additional details.

On July 3, 2019, the Weatherford Parties borrowed approximately $1.4 billion under the DIP Credit Agreement and the proceeds were used to repay certain prepetition indebtedness, cash collateralize certain obligations with respect to letters of credit and similar instruments and finance the working capital needs and general corporate purposes of the Weatherford Parties and certain of their subsidiaries.

1 unchanged sentence

In addition, we cash collateralized approximately $271 million of letters of credit and similar instruments with borrowings from the DIP Credit Agreement.

See “ Note 13 – Short-term Borrowings and Other Debt Obligations ” for additional details.

See “Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings” for additional details.

The DIP Credit Agreement was repaid in full upon emergence from Bankruptcy on December 13, 2019.

1 unchanged sentence

Upon emergence from bankruptcy on December 13, 2019, the Predecessor’s senior and exchangeable senior notes were cancelled pursuant to the terms of the Plan, resulting in a gain on extinguishment of debt of $4.3 billion recorded in “Reorganization Items” on the Consolidated Statements of Operations.

On the Effective Date we issued Exit Notes for an aggregate principal amount of $2.1 billion (of which $500 million was in the form of Exit Takeback Notes to existing creditors on the senior notes being cancelled).

Interest on the Exit Notes will accrue at the rate of 11.00% per annum and will be payable semiannually in arrears on June 1 and December 1, commencing on June 1, 2020.

On the Effective Date, we issued Senior Notes maturing on December 1, 2024 (“Exit Notes”) for an aggregate principal amount of $2.1 billion (of which $500 million was in the form of Exit Takeback Notes to existing creditors on the senior notes being cancelled).

Interest on the Exit Notes accrue at the rate of 11.00% per annum and is payable semiannually in arrears on June 1 and December 1.

We commenced interest payments on June 1, 2020.

For the 2019 Predecessor Period, we had net short-term repayments of $347 million primarily from our borrowings and repayments of the DIP Credit Agreement and our Predecessor Revolving Credit Agreements, including the repayment of our 364-Day Credit Agreement.

2 unchanged sentences

The amount in excess of par value of $2.9 billion is reported in “Capital in Excess of Par Value” on the accompanying Consolidated Balance Sheets.

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Table of Contents Item 7 | MD&A

On the Effective Date, the Company issued warrants (“New Warrants”) to holders of the Company’s Old Ordinary Shares, to purchase up to an aggregate of 7,777,779 New Ordinary Shares in the Company, par value $0.001 (the “New Ordinary Shares”), at an exercise price of $99.96 per ordinary share.

5 unchanged sentences

In April 2018, we repaid the remaining principal outstanding on an early redemption of the bond.

We recognized a cumulative loss of $34 million on these transactions in “ Bond Tender and Call Premium ” on the accompanying Consolidated Statements of Operations.

In June of 2017, we repaid our 6.35% senior notes on the maturity date.

On June 26, 2017, we issued an additional $250 million aggregate principal amount of our 9.875% senior notes due 2024.

These notes were issued as additional securities under an indenture pursuant to which we previously issued $540 million aggregate principal amount of our 9.875% senior notes due 2024.

See “ Note 13 – Short-term Borrowings and Other Debt Obligations ” and “ Note 14 – Long-term Debt ” for additional details of our financing activities.

Results of Operations

The following table sets forth consolidated results of operations and financial information by operating segment and other selected information for the periods indicated.

The Successor Period and the Predecessor Period are distinct reporting periods as a result of our emergence from bankruptcy on December 13, 2019.

References in these results of operations to the change and the percentage change

We recognized a cumulative bond tender loss of $34 million on these transactions in “Other Expense, Net” on the accompanying Consolidated Statements of Operations.

See “Note 14 – Borrowings and Other Debt Obligations” for additional details of our financing activities.

We did not have any significant divestitures of businesses during the Successor year ended December 31, 2020.

See “Note 8 – Business Combinations and Divestitures” for further details related to divestitures of businesses completed during 2019 and 2018.

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Table of Contents Item 7 | MD&A

combine the Successor Period and Predecessor Period results for the year ended December 31, 2019 in order to provide some comparability of such information to the year ended December 31, 2018.

While this combined presentation is not presented according to generally accepted accounting principles in the United States (“GAAP”) and no comparable GAAP measure are presented, management believes that providing this financial information is the most relevant and useful method for making comparisons to the year ended December 31, 2018 as the eighteen days of the Successor Period is not a significant period of time impacting the combined results.

(Unfavorable)

(Dollars in millions, except per share data)

Results of Operations

The following table sets forth consolidated results of operations and financial information by operating segment and other selected information for the periods indicated.

The 2020 and 2019 Successor Periods and the 2019 and 2018 Predecessor Periods are distinct reporting periods as a result of our emergence from bankruptcy on December 13, 2019.

References in these results of operations to the change and the percentage change combine the 2019 Successor Period and 2019 Predecessor Period results for the year ended December 31, 2019 in order to provide some comparability of such information to the years ended December 31, 2020 and December 31, 2018.

While this combined presentation is not presented according to generally accepted accounting principles in the United States (“GAAP”) and no comparable GAAP measure are presented, management believes that providing this financial information is the most relevant and useful method for making comparisons to the years ended December 31, 2020 and December 31, 2018 as the eighteen days of the Successor Period is not a significant period of time impacting the combined results.

Successor Predecessor Combined Change Combined Change

From From Favorable Favorable

Year 12/14/19 01/01/19 Year (Unfavorable) (Unfavorable)

Ended through through Ended $ % $ %

(Dollars in millions, except per share data) 12/31/20 12/31/19 12/13/19 12/31/18 2020 vs 2019 2019 vs 2018

Western Hemisphere $ 1,586 $ 121 $ 2,620 $ 3,063 $ (1,155) (42) % $ (322) (11) %

1 unchanged sentence

Total Revenues

3,685 261 4,954 5,744 (1,530) (29) % (529) (9) %

Operating Income (Loss):

1 unchanged sentence

Eastern Hemisphere 37 10 134 119 (107) (74) % 25 21 %

Total Segment Operating Income (Loss)

Total Other Operating Expenses, Net

Total Segment Operating Income 55 6 188 327 (139) (72) % (133) (41) %

Corporate (111) (5) (118) (130) 12 10 % 7 5 %

Impairments and Other Charges (1,236) — (1,104) (2,155) (132) (12) % 1,051 49 %

Restructuring Charges (206) — (189) (126) (17) (9) % (63) (50) %

Prepetition Charges — — (86) — 86 100 % (86) NA

Gain on Operational Assets Sale 12 — 15 — (3) (20) % 15 NA

Gain on Sale of Businesses, Net — — 112 — (112) (100) % 112 NA

Total Operating Income (Loss) (1,486) 1 (1,182) (2,084) (305) (26) % 903 43 %

Reorganization Items

Reorganization Items (9) (4) 5,389 — (5,394) (100) % 5,385 NA

Interest Expense, Net (266) (12) (362) (614) 108 29 % 240 39 %

Total Other Income (Expense), Net

Total Other Expense, Net (53) — (26) (59) (27) (104) % 33 56 %

Income (Loss) before Income Taxes (1,814) (15) 3,819 (2,757) (5,618) (148) % 6,561 238 %

1 unchanged sentence

Net Income (Loss) $ (1,899) $ (24) $ 3,684 $ (2,791) $ (5,559) (152) % $ 6,451 231 %

Net Income Attributable to Noncontrolling Interests

Net Income (Loss) Attributable to Weatherford

Net Loss per Share

Weighted Average Shares Outstanding

Depreciation and Amortization

Revenues Percentage by Product Lines

We provide equipment and services used in the production, completions, drilling and evaluation, and well construction of oil and natural gas wells.

The composition of our consolidated revenues by product line group is as follows:

Successor Predecessor

Period From Period From

Year 12/14/19 01/01/19 Year

Ended through through Ended

12/31/2020 12/31/2019 12/13/2019 12/31/2018

Completion and Production 51 % 52 % 47 % 47 %

Drilling, Evaluation and Intervention 49 48 53 53

Total 100 % 100 % 100 % 100 %

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Table of Contents Item 7 | MD&A

Drilling and Evaluation

Well Construction

Consolidated and Segment Revenues

2020 vs 2019 Revenues

Combined consolidated revenues decreased $529 million , or 9% in 2019, compared to 2018.

Consolidated 2020 revenues of $3.7 billion decreased $1.5 billion, or 29%, compared to the 2019 Combined Period.

The unprecedented global health and economic crisis sparked by the COVID-19 pandemic negatively impacted industry activity.

The lower demand for oil and gas created by the impact of the COVID-19 pandemic, together with uncertainty around the extent and timing for an economic recovery, have caused significant reductions to the capital spending plans of exploration and production companies.

• Western Hemisphere revenues decreased $1.2 billion, or 42%, in 2020 compared to the 2019 Combined Period due to the decline in activity and demand due to the COVID-19 pandemic.

This resulted in lower activity levels in the U.S.

and Canada as a result of a decline in rig related activity and exploration spending, which has reduced demand for completion, production drilling, evaluation and intervention products and services.

We also experienced declines in Latin America with significant activity reductions in Argentina and Colombia due to the COVID-19 pandemic and lower demand for oil and gas.

• Eastern Hemisphere revenues decreased $375 million, or 15%, in 2020 compared to the 2019 Combined Period, also due to the decline in activity in the Middle East, North Africa, Asia and Russia due to the COVID-19 pandemic.

2019 vs 2018 Revenues

Consolidated revenues for the 2019 Combined Period decreased $529 million, or 9% compared to 2018.

Western Hemisphere combined revenues decreased $322 million , or 11% , in 2019 compared to 2018, due to lower activity levels in the U.S.

and Canada as a result of a decline in rig related activity and exploration spending, which has reduced demand for drilling, completion and production products and services.

• Western Hemisphere revenues decreased $322 million, or 11%, in the 2019 Combined Period compared to 2018, due to lower activity levels in the U.S.

and Canada as a result of a decline in rig related activity and exploration spending, which has reduced demand for completion, production, drilling, evaluation and intervention products and services.

The decline in Canada was partially offset by higher activity in integrated service projects and product sales in Mexico.

Eastern Hemisphere combined revenues decreased $207 million , or 8% , in 2019 compared to 2018.

• Eastern Hemisphere revenues decreased $207 million, or 8%, in the 2019 Combined Period compared to 2018.

The decline in revenues was primarily due to lower revenues from our divested land drilling rigs businesses in the Middle East and North Africa, as well as our divested laboratories and surface logging businesses.

1 unchanged sentence

Excluding the impact of revenues from the divested portion of the land drilling rigs, laboratory services and surface logging businesses, revenues in 2019 increased $105 million, or 5% in 2019 compared to 2018.

2018 vs 2017 Revenues

Consolidated revenues increased $45 million , or 1% , in 2018 compared to 2017.

Western Hemisphere revenues improved $126 million , or 4% , in 2018 compared to 2017 on higher activity levels in all product lines in the U.S.

and an improved product mix for the Production and Completions product lines in the U.S.

Growth in Latin America was driven by higher demand for Integrated Services and Projects and improved activity levels in Latin America.

These improvements were partially offset by lower activity in Canada due to a general slowdown and increasing crude oil differentials.

Eastern Hemisphere revenues declined $81 million , or 3% , in 2018 compared to 2017, respectively.

The modest decline in revenues was primarily due to fewer offshore projects in West Africa, the North Sea and Asia, partially offset with increased activity and higher product sales in the Gulf Cooperation Countries.

Consolidated and Segment Operating Results

2020 vs 2019 Segment Operating Results

Successor segment operating income in 2020 was $55 million , a decrease of $139 million, compared to the 2019 Combined Period.

The result was principally driven by the impact of the COVID-19 pandemic resulting in lower activity levels in North America as well as declines in activity internationally, primarily in Latin America, Middle East, North Africa and Russia.

Western Hemisphere Successor segment reported operating income of $18 million in the year ended December 31, 2020 declined $32 million, compared to the 2019 Combined Period.

The segment income decline was impacted by lower activity levels in North America, Argentina and Colombia, the deterioration in demand for services due to the COVID-19 pandemic and weakening demand for oil and gas.

Eastern Hemisphere Successor segment reported operating income of $37 million for the year ended December 31, 2020 was down by $107 million compared to the 2019 Combined Period.

The segment income decline was impacted by slowing activity levels, deterioration in demand for services due to the COVID-19 pandemic and weakening demand for oil and gas.

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Table of Contents Item 7 | MD&A

Consolidated and Segment Operating Results

2019 vs 2018 Operating Results

Combined consolidated operating results improved $903 million , or 43% , in 2019 compared to 2018, while combined segment operating income declined $133 million , or 41% , in 2019 compared to 2018.

The improvement was due to lower goodwill impairment charges, the net gain on sale of businesses and improved results in the Eastern Hemisphere as a result of a more favorable geographic and product mix, partially offset by higher prepetition charges.

Excluding goodwill impairment, prepetition charges, and the net gain on sale of businesses of $704 million in 2019 and goodwill impairment of $1.9 billion in 2018, consolidated results were down $310 million in 2019 compared to 2018.

Additionally, during 2019 lower demand for our products and services coupled with an unfavorable product mix and lack of supply chain savings caused the delay of the expected benefits from our revenue and profitability improvement efforts and consequently resulted in significantly lower actual results.

During 2019, we also incurred higher than forecasted costs associated with consolidating our manufacturing facilities and the deteriorating market negatively impacted progress towards our sales and commercial savings targets.

Combined segment operating income decreased $133 million in 2019 compared 2018.

2019 vs 2018 Segment Operating Results

Segment operating income decreased $133 million in the 2019 Combined Period compared 2018.

The decrease was driven by lower activity levels, an unfavorable product mix in Canada and the United States, and start-up costs for projects in Latin America.

1 unchanged sentence

Western Hemisphere combined segment operating income of declined $158 million , or 76% , in 2019 compared to 2018.

• Western Hemisphere segment operating income declined $158 million, or 76%, in the 2019 Combined Period compared to 2018.

The segment income decline was driven by lower activity levels, lower operating margin product sales in Canada, start-up costs for projects in Argentina and employee retention expenses.

These declines were partially offset by improved operating results from higher integrated service project activity in Mexico.

Eastern Hemisphere combined segment operating income improved $25 million , or 21% , in 2019 compared to 2018.

• Eastern Hemisphere segment operating income improved $25 million, or 21%, in the 2019 Combined Period compared to 2018.

The improvement in segment operating income was due to the lower direct expenses, cost improvements, partially offset by the impact of the divestitures.

2018 vs 2017 Operating Results

Consolidated operating results improved $86 million , or 4% , in 2018 compared to 2017 and segment operating income of $327 million improved $579 million , or 230% , in 2018 compared to 2017.

Our consolidated operating loss improvement was primarily due to the following:

Higher activity and productivity related to the increase in Western Hemisphere rig count;

Higher utilization in our product lines, improved sales mix and the continued realization of savings from cost reduction measures related to headcount reductions and facility closures, and lower depreciation and amortization due to decreased capital spending;

Through our revenue and profit improvement efforts we have improved our segment operating income following the positive structural changes, improvements in our operating efficiency, ongoing lowering of our non-productive time, improvements in our collaboration with our customers by continuing our steady progress on our transformation initiatives:

Lower long-lived asset impairments and asset write-downs compared to 2017.

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Table of Contents Item 7 | MD&A

Western Hemisphere 2018 segment operating income of $208 million improved $321 million , or 284% , compared to 2017.

The improvement was driven by Production, Completions and Well Construction activity increases in the U.S.

with a profitable product mix, and a decline in operating costs as a result of our transformation efforts.

Operating income also improved due to growth in Latin America driven by higher demand for Integrated Services and Projects and improved activity levels in Latin America across all product lines.

These improvements were partially offset by lower operating results in Canada as a result of the difficult macro environment and adverse foreign exchange rate impacts in Latin America.

Eastern Hemisphere 2018 segment operating income of $119 million improved $258 million , or 186% , compared to 2017.

The improvement is primarily a result of improved product mix, a reduced cost structure and improved service quality resulting in greater operational efficiency.

Interest Expense, Net

Net interest expense was $12 million for the Successor Period representing interest expense on our Exit Notes, due December 1, 2024, with a stated interest rate of 11%, and $362 million for the 2019 Predecessor Period, as compared to $614 million for the Predecessor in 2018 .

This decrease in interest expense was $240 million , or 39% .

The decrease in interest expense for 2019 was primarily due to unrecognized contractual interest (no longer accruing interest) on our unsecured senior notes during the Chapter 11 proceedings, which began July 1, 2019, as well as the elimination of the amortization of deferred financing costs and debt discounts.

These unamortized balances were recognized as expenses under “Reorganization Items” on our Condensed Consolidated Statements of Operations.

Included in interest expense during the 2019 Predecessor Period, was interest on debtor-in-possession financing and default interest on our A&R Credit Agreement.

Net interest expense was $614 million in 2018 compared to $579 million in 2017 .

This increased interest expense of $35 million , or 6% , was primarily due to a full year of interest expense on higher interest rates from the senior notes and exchangeable notes issued in 2016.

Warrant Fair Value Adjustment – Predecessor

We did not have any warrant fair value income in 2019.

Warrant fair value income was $70 million in 2018 and $86 million in 2017 related to the fair value adjustment to the warrant liability.

On May 21, 2019, the option period to exercise the warrants lapsed and the warrants expired unexercised with a fair value of zero .

The change in fair value of the warrant during 2018 was primarily driven by eliminating the warrant share value associated with any future equity issuance and a decrease in the Predecessor’s stock price.

The change in fair value of the warrant during 2017 was principally due to a decrease in the Predecessor’s stock price.

Consolidated net interest expense of $266 million for year ended December 31, 2020 represents interest on our 11.0% Exit Notes, our 8.75% Senior Secured Notes and the write-off of unamortized deferred debt issuance costs of $15 million associated with the termination of our senior secured lending agreement (“ABL Credit Agreement”).

See “Note 14 – Borrowings and Other Debt Obligations” to the Consolidated Financial Statements for further details on the refinancing.

Net interest expense was $12 million for the Successor Period 2019 representing interest expense on our Exit Notes and $362 million for the 2019 Predecessor Period, as compared to $614 million for the Predecessor in 2018.

The decrease in interest expense for 2019 was primarily due to unrecognized contractual interest (no longer accruing interest) on our unsecured senior notes as well as the elimination of the amortization of deferred financing costs and debt discounts during the Chapter 11 proceedings, which began July 1, 2019, partially offset by interest on debtor-in-possession financing and default interest on our A&R Credit Agreement.

Other Income (Expense), Net

We incurred other expense of $26 million in the 2019 Predecessor Period, other expense of $46 million in 2018 and other income of $7 million in 2017 .

Successor other expense was $53 million for the year ended December 31, 2020 compared to Predecessor other expense of $26 million in 2019 and $59 million in 2018.

Other expense was primarily driven by foreign currency exchange losses of $34 million for the year ended December 31, 2020 compared to $14 million for the 2019 Combined Period.

The unfavorable change primarily relates to the weakening of foreign currencies following the onset of the COVID-19 pandemic.

Other expense also includes letter of credit fees and other financing fees.

In 2019 and 2018, other expense was primarily driven by foreign currency exchange losses, letter of credit fees, other financing fees and non-service periodic pension and other post-retirement benefit expenses.

In 2017, other income was primarily due to gains associated with our supplemental executive retirement plan and non-service periodic pension and other post-retirement benefit expenses partially offset by foreign currency exchange losses, letter of credit and other financing fees.

Foreign exchange losses are typically due to the strengthening U.S.

dollar compared to our foreign denominated operations.

Currency Devaluation Charges

We did not recognize currency devaluation charges for the Predecessor Period or the Successor Period.

For the year ended December 31, 2018 , we recognized currency devaluation charges of $49 million primarily related to the devaluation of the Angolan kwanza due to a change in Angolan central bank policy in 2018.

For the year ended December 31, 2017 , we had no significant currency devaluation charges.

Currency devaluation charges are included in current earnings in “Currency Devaluation Charges” on the accompanying Consolidated Statements of Operations .

For additional information see “Cash Requirements” of the “Liquidity and Capital Resources” section in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We provide for income taxes based on the laws and rates in effect in the countries in which operations are conducted, or in which we or our subsidiaries are considered resident for income tax purposes.

The relationship between our pre-tax income or loss from continuing operations and our income tax benefit or provision varies from period to period as a result of various factors, which include changes in total pre-tax income or loss, the jurisdictions in which our income is earned, the tax laws in those jurisdictions, the impacts of tax planning activities and the resolution of tax audits.

On September 26, 2019, our parent company

Included in other expense on the accompanying Consolidated Statements of Operations for the year ended December 31, 2018, was currency devaluation expense of $49 million primarily related to the devaluation of the Angolan kwanza due to a change in Angolan central bank policy in 2018.

Warrant fair value income was $70 million in 2018 related to the fair value adjustment to the Predecessor warrant liability.

We did not have any warrant fair value income in 2020 or 2019.

On May 21, 2019, the option period to exercise the warrants lapsed and the warrants expired unexercised with a fair value of zero.

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Table of Contents Item 7 | MD&A

ceased to be a Swiss tax resident and became an Irish tax resident subject to tax under the Irish tax regime.

Prior to our reorganization, our income derived from sources outside Switzerland were exempt from Swiss cantonal and communal tax and are also granted participation relief from Swiss federal tax for qualifying dividend income and capital gains related to the sale of qualifying investments in subsidiaries.

The participation relief should result in a full exemption of participation income from Swiss federal income tax.

However, our effective rate differs significantly from the Irish and Swiss statutory tax rate as the majority of our operations are taxed in jurisdictions with much higher tax rates.

In the year ended December 31, 2018 other expense included a cumulative bond tender loss of $34 million in “Other Expense, Net” on the accompanying Consolidated Statements of Operations.

We did not have any bond tender loss in 2020 or 2019.

On September 26, 2019, our parent company ceased to be a Swiss tax resident and became an Irish tax resident subject to tax under the Irish tax regime.

As a result, our effective rate differs from the Irish statutory tax rate as the majority of our operations are taxed in jurisdictions with different tax rates.

In addition, we are unable to recognize tax benefit on our losses.

We record deferred tax assets for net operating losses and temporary differences between the book and tax basis of assets and liabilities that are expected to produce tax deductions in future periods.

The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those deferred tax assets would be deductible.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those deferred tax assets would be deductible.

The Company assesses the realizability of its deferred tax assets each period by considering whether it is more likely than not that all or a portion of the deferred tax assets will not be realized.

The Company considers all available evidence (both positive and negative) when determining whether a valuation allowance is required.

The Company evaluated possible sources of taxable income that may be available to realize the benefit of deferred tax assets, including projected future taxable income, the reversal of existing temporary differences, taxable income in carryback years and available tax planning strategies, and the impact of fresh start accounting in making this assessment.

The Company evaluates possible sources of taxable income that may be available to realize the benefit of deferred tax assets, including projected future taxable income, the reversal of existing temporary differences, taxable income in carryback years and available tax planning strategies, and the impact of fresh start accounting in making this assessment.

The realizability of the deferred tax assets is dependent upon judgments and assumptions inherent in the determination of future taxable income, including factors such as future operation conditions (particularly as related to prevailing oil prices and market demand for our products and services).

We will continue to evaluate whether valuation allowances are needed in future reporting periods.

Valuation allowances will remain until the Company can determine that net deferred tax assets are more likely than not to be realized.

In the event that the Company were to determine that it would be able to realize the deferred income tax assets in the future as a result of significant improvement in earnings as a result of market conditions, the Company would adjust the valuation allowance, reducing the provision for income taxes in the period of such adjustment.

In 2019, the income tax provision was $9 million for the Successor Period and $135 million for the Predecessor Period as compared to a tax provision of $34 million in 2018 and $137 million in 2017, respectively, which resulted in an effective tax rate of (60)% , 3% , (1)% and (5)% , respectively.

Our income tax provision during the Successor Period of $9 million on a loss before income taxes of $15 million was primarily driven by profits in certain jurisdictions, deemed profit countries and withholding taxes on intercompany and third-party transactions that do not directly correlate to ordinary income or loss.

Our income tax provision during the 2019 Predecessor Period of $135 million on earnings before income taxes of $3.8 billion was primarily driven by profits in certain jurisdictions, deemed profit countries and withholding taxes on intercompany and third-party transactions that do not directly correlate to ordinary income or loss.

Our results for the Predecessor Period also include $32 million of tax expense related to the Fresh Start Accounting impacts and $14 million of tax benefit primarily related to the goodwill and other asset impairments or write-downs.

Other charges of approximately $77 million , related to restructuring expense and gain on the sale of businesses, resulted in $3 million in tax expense.

The Company concluded it was not able to realize the benefit of its deferred tax assets and has established a valuation allowance.

The income tax provision for the Successor year 2020 was $85 million as compared to a tax provision of $9 million for the Successor Period and $135 million for the Predecessor Period of 2019, and $34 million in 2018, which resulted in an effective tax rate of (5)%, (60)%, 3% and (1)%, respectively.

Our tax expense is primarily driven by profits in certain jurisdictions, deemed profit countries and withholding taxes on intercompany and third-party transactions that do not directly correlate to ordinary income or loss.

Impairments and other charges are subject to tax rules in our various jurisdiction as to their deductibility, but generally do not result in significant tax benefits to us due to our inability to forecast realization of such benefits.

Our results for the 2019 Predecessor period include $32 million of tax expense related to the Fresh Start accounting impacts and $14 million of tax benefit primarily related to goodwill and other asset impairments and write-downs.

We also recognized $4.3 billion gain on Settlement of Liabilities Subject to Compromise as a result of the bankruptcy (See “Note 3 – Fresh Start Accounting”) with no tax impact due to it being attributed to Bermuda, which has no income tax regime, and the U.S., which resulted in the reduction of our U.S.

unbenefited net operating losses carryforward under the operative tax statute and applicable regulations offset by the release of a similar amount of valuation allowance.

Prepetition charges (charges prior to Petition Date) and reorganization items (charges after Petition Date) had no significant tax impact.

We also had $4.3 billion gain on Settlement of Liabilities Subject to Compromise as a result of the bankruptcy with no tax impact due to it being attributed to Bermuda, which has no income tax regime, and the U.S., which resulted in the reduction of our U.S.

unbenefited net operating losses carryforward under the operative tax statute and applicable regulations offset by the release of the valuation allowance.

Our effective tax rate for these periods was also negatively impacted by the taxing regimes in certain countries and our operating structure.

Several of the countries in which we operate, primarily in our Eastern Hemisphere, tax is based on “deemed”, rather than actual, profits.

We are not currently profitable in certain of those countries, which results in us accruing and paying taxes based on a “deemed profit” instead of recognizing no tax expense or potentially recognizing a tax benefit.

Our operating structure results in us paying withholding taxes on intercompany and third-party transactions for items such as rentals, management fees, royalties, and interest as well as on applicable third-party transactions.

Such net withholding taxes were $2 million in Successor Period in 2019, $41 million in Predecessor Period in 2019, $40 million in 2018 and $43 million in 2017 prior to possibly receiving a tax benefit in the jurisdiction of the payee.

We also incur pre-tax losses in certain jurisdictions that do not have a corporate income tax and thus we are not able to recognize an income tax benefit on those losses.

Our income tax provision in 2018 was $34 million on a loss before income taxes of $2.8 billion .

Results for the year ended December 31, 2018 include losses with no significant tax benefit.

The tax expense for the year ended December 31, 2018 also includes withholding taxes and deemed profit taxes that do not directly correlate to ordinary income or loss.

The primary driver of the tax expense was due to profits in certain jurisdictions, deemed profit countries and withholding taxes on intercompany and

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third-party transactions.

Our results for 2018 also include charges with $70 million tax benefit principally related to the $1.9 billion goodwill impairment.

The other asset write-downs and other charges, including $238 million in long-lived asset impairments, $126 million in restructuring charges and the warrant fair value adjustment of $70 million resulted in no significant tax benefit.

Our income tax provision in 2017 was $137 million on a loss before income taxes of $2.7 billion .

The primary driver of the tax expense was due to profits in certain jurisdictions, deemed profit countries and withholding taxes on intercompany and third-party transactions.

In addition, the Company concluded that it needed to record a valuation allowance of $73 million in the fourth quarter of 2017 against certain previously benefited deferred tax assets since it cannot support that it is more likely than not that the deferred tax assets will be realized.

The additional valuation allowance was partially offset by a one-time $52 million benefit as a result of the recent U.S tax reform.

Our results for 2017 also include charges with no significant tax benefit principally related to asset write-downs and other charges including $928 million in long-lived asset impairments, $540 million inventory charges including excess and obsolete, $230 million in the write-down of Venezuelan receivables and $66 million of other write-downs charges and credits, $183 million in restructuring charges and the warrant fair value adjustment of $86 million .

On December 22, 2017, the U.S.

enacted into law a comprehensive tax reform bill (the “Tax Cuts and Jobs Act,” or “TCJA”).

The TCJA significantly revises the U.S.

corporate income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21% , eliminating certain deductions, imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries as of 2017 held in cash and illiquid assets (with the latter taxed at a lower rate), and a shift of the U.S.

taxation of multinational corporations from a tax on worldwide income to a partial territorial system (along with certain rules designed to prevent erosion of the U.S.

income tax base, such as the base erosion and anti-abuse tax).

The permanent reduction in the U.S.

statutory corporate tax rate to 21% from 35% decreased the amount of the U.S.

deferred tax assets and liabilities by $249 million with a decrease to the valuation allowance of $301 million for a net tax benefit of $52 million recorded for the year ended December 31, 2017.

The TCJA did not have other impacts on the Company’s effective tax rate because of the valuation allowance against the U.S.

deferred tax assets.

Any potential impact would be offset by un-benefitted U.S.

net operating loss carryforwards.

As we did not have all the necessary information to analyze all effects of this tax reform as of December 31, 2017, this was a provisional amount which we believed represented a reasonable estimate of the accounting implications of this tax reform.

We finalized our accounting for this matter during 2018 and concluded that no adjustments to the provisional amounts recorded during 2017 were identified during the twelve months ended December 31, 2019 or 2018.

Our results for the 2018 Predecessor period include charges with $70 million tax benefit principally related to the $1.9 billion goodwill impairment.

Other significant 2018 charges did not result in significant tax benefit.

We are continuously under tax examination in various jurisdictions.

We cannot predict the timing or outcome regarding resolution of these tax examinations or if they will have a material impact on our financial statements.

As of December 31, 2019, we anticipate that it is reasonably possible that the amount of uncertain tax positions may decrease by up to $6 million in the next twelve months due to expiration of statutes of limitations, settlements and/or conclusions of tax examinations.

Restructuring, Facility Consolidation and Severance Charges

Due to the highly competitive nature of our business and the continuing losses we incurred over the last few years, we continue to reduce our overall cost structure and workforce to better align our business with current activity levels.

Our current and historical restructuring plans include workforce reductions, organization restructurings, facility consolidations and other cost reduction measures and efficiency initiatives across all of our geographic regions.

During the 2019 Predecessor Period, we recognized restructuring charges of $189 million , which include severance charges of $53 million and other restructuring charges of $99 million and restructuring related asset charges of $37 million .

During 2018, we recognized restructuring charges of $126 million , which include severance charges of $61 million , other restructuring charges of $59 million and restructuring related asset charges of $6 million .

During 2017, we recognized restructuring charges of $183 million , which include severance charges of $109 million , other restructuring charges of $62 million and restructuring related asset charges of $12 million .

Please see “ Note 11 – Restructuring, Facility Consolidation and Severance Charges ” to our Consolidated Financial Statements for additional details of our charges by segment.

We cannot predict the timing or outcome regarding resolution of these tax examinations or if they will have a material impact on our consolidated financial statements.

As of December 31, 2020, we anticipate that it is reasonably possible that the amount of our uncertain tax positions of $222 million may decrease by up to $4 million in the next twelve months due to expiration of statutes of limitations, settlements and/or conclusions of tax examinations.

In response to the COVID-19 pandemic, many countries have enacted tax relief measures to provide aid and economic stimulus to companies impacted by the COVID-19 pandemic.

For the Successor year ended December 31, 2020, there were no material tax impacts to our financial statements as it relates to COVID-19 tax relief measures.

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Restructuring Charges

In response to the impact of our business from the COVID-19 pandemic and the significant and sudden changes in oil and gas prices, we have continued to develop and execute on plans to rationalize and restructure our business and right-size our operations and personnel.

Additional charges with respect to our ongoing cost reduction actions may be recognized in subsequent periods.

During the Successor year ended December 31, 2020, we incurred restructuring charges of $206 million.

During the 2019 and 2018 Predecessor Periods, we recognized restructuring charges of $189 million and $126 million.

Please see “Note 12 – Restructuring Charges” to our Consolidated Financial Statements for additional details of our charges by type and by segment.

Liquidity and Capital Resources

At December 31, 2019 , we had cash, cash equivalents and restricted cash of $800 million compared to $602 million at December 31, 2018 and $613 million at December 31, 2017 .

At December 31, 2019, we had available liquidity of approximately $850 million , which is calculated as cash and cash equivalents plus ABL facility availability.

At December 31, 2020, we had total cash and cash equivalents and restricted cash of $1.3 billion of which $167 million was restricted cash, compared to total cash and cash equivalents and restricted cash of $800 million of which $182 million was restricted cash at December 31, 2019.

The following table summarizes cash provided by (used in) each type of business activity, for the years ended December 31, 2020, 2019 and 2018:

Successor Predecessor

Year 12/14/2019 1/1/2019 Year

Ended through through Ended

(Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 12/31/2018

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Operating Activities

Cash provided by operating activities in the Successor Period, was $61 million .

Cash used in operating activities was $747 million in the Predecessor Period compared to $242 million in 2018 and $388 million in 2017 .

Cash used in operating activities in 2019 and 2018 were driven by working capital needs, payments for debt interest, retention and performance bonus, severance and other restructuring and transformation costs.

In 2019, cash used in operating activities included payments for reorganization items and prepetition charges primarily for professional and other fees related to the Cases.

In 2018, operating cash outflow improvement was a result of working capital efficiencies and lower cash severance and restructuring.

In 2017, operating cash outflows also included cash for litigation settlements.

Cash provided by operating activities was $210 million and $61 million during the 2020 and 2019 Successor Periods.

Cash provided by Successor operating activities during 2020 was driven by collections on our accounts receivables, partially offset by payments for interest and severance.

Cash used in operating activities was $747 million in the 2019 Predecessor Period compared to $242 million in 2018.

Cash used in operating activities in 2019 and 2018 were driven by working capital needs, payments for debt interest, and severance and other restructuring and transformation costs.

In 2019, cash used in operating activities also included payments for reorganization items and prepetition charges primarily for professional and other fees related to the Cases and retention and performance bonuses.

Investing Activities

Cash used in investing activities was $14 million during the Successor Period primarily for capital expenditures, which was partially offset by adjustments to proceeds from a prior sale of a business.

Our investing activities provided cash of $149 million during the Predecessor Period and $122 million during 2018 and utilized cash of $62 million during 2017 .

Cash used in investing activities for the Successor was $75 million for the year ended December 31, 2020.

The primary use of cash in investing activities were capital expenditures of $154 million for property, plant and equipment.

The primary sources of cash from investing activities included $22 million from asset dispositions and $50 million from the maturity of our Angolan government bonds.

The amount we spend for capital expenditures varies each year and is based on the types of contracts into which we enter, our asset availability and our expectations with respect to activity levels.

Cash used in investing activities was $14 million during the 2019 Successor Period primarily for capital expenditures, which was partially offset by adjustments to proceeds from a prior divestiture of a business.

Our investing activities provided cash of $149 million during the 2019 Predecessor Period and $122 million during 2018.

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During the 2019 Successor Period, the primary use of cash from investing activities was $20 million capital expenditures for property, plant and equipment.

During 2019, the primary sources of cash were (i) proceeds from the sale of business of $328 million primarily from completed dispositions of our rigs business, laboratory services and surface data logging businesses and (ii) proceeds of $84 million from the disposition of other assets.

During the 2019 Predecessor Period, the primary uses of cash in investing activities were (i) capital expenditures of $250 million for property, plant and equipment and (ii) cash paid of $13 million to acquire intellectual property and other intangibles, offset by the primary sources of cash that were (i) proceeds from the divestitures of businesses of $328 million (primarily from the divestitures of our rigs, laboratory services and surface data logging businesses) and (ii) proceeds of $84 million from the asset dispositions.

See “Note 8 – Business Combinations and Divestitures” for additional information.

During 2018, the primary uses of cash in investing activities were (i) capital expenditures of $217 million for property, plant and equipment and the acquisition of assets held for sale and (ii) cash paid of $28 million to acquire intellectual property and other intangibles.

During 2018, the primary sources of cash were (i) cash proceeds from the sale of business of $257 million from the sale of our land drilling rigs businesses in Kuwait and Saudi Arabia, as well as the continuous sucker rod service business in Canada and the sale of an equity investment and (ii) cash proceeds of $106 million from the disposition of other assets.

On December 29, 2017, we completed the sale of our U.S.

pressure pumping and pump-down perforating assets for $430 million in cash.

As part of this transaction, we sold our U.S.

pressure pumping and pump-down perforating related facilities and supplier and customer contracts.

In addition, during 2017, we received cash proceeds of $51 million from the disposition of other assets.

The primary drivers of cash used in investing activities are capital expenditures for PP&E and the purchase of assets held for sale.

Capital expenditures for the Predecessor were $250 million , $186 million and $225 million for 2019 , 2018 and 2017 , respectively.

In addition, during 2018 we purchased assets totaling $31 million related to our land drilling rigs business, which were impaired at the time of purchase as our land drilling rigs were classified as held for sale.

Additionally, in 2017 we purchased

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assets held for sale of $244 million related to certain leased equipment utilized in our North America pressure pumping operations.

The amount we spend for capital expenditures varies each year based on the type of contracts that we enter, our asset availability and our expectations with respect to industry activity levels in the following year.

Investing activities in 2017 also included the purchase of held-to-maturity Angolan government bonds of $50 million , payments of $15 million to acquire intellectual property and other intangibles, and $7 million of business acquisition payments primarily related to our last installment payment for a previously completed acquisition.

During 2018, the primary sources of cash were (i) cash proceeds from the divestiture of business and investments of $257 million (primarily from the divestitures of our land drilling rigs businesses in Kuwait and Saudi Arabia, the continuous sucker rod service business in Canada and the sale of an equity investment) and (ii) cash proceeds of $106 million from the disposition of other assets.

Financing Activities

Our financing activities provided cash of $749 million , $168 million and $20 million during the 2019 Predecessor Period, and years ended December 31, 2018 and 2017 , respectively.

Cash provided by financing activities for the Successor was $348 million for the year ended December 31, 2020, sourced primarily from net proceeds of $453 million from the issuance of our Senior Secured Notes and offset by the repayment of debt, cash paid of $24 million related to a deferred consideration for our 2018 acquisition of our Qatari joint venture and other financing activities of $81 million.

On August 28, 2020, we completed a series of financing transactions that meaningfully enhanced our liquidity, including issuing $500 million of Senior Secured Notes, terminating our ABL Credit Agreement, and amending and increasing the size of our LC Credit Agreement to $215 million.

See “Note 14 – Borrowings and Other Debt Obligations” to the Consolidated Financial Statements for further details .

Cash provided by financing activities was $749 million during the 2019 Predecessor Period.

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In addition, we cash collateralized approximately $271 million of letters of credit and similar instruments with borrowings from the DIP Credit Agreement.

See “ Note 13 – Short-term Borrowings and Other Debt Obligations ” for additional details.

See “Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings” for additional details.

The DIP Credit Agreement was repaid in full upon emergence from Bankruptcy on December 13, 2019.

As of the Petition Date, the Predecessor’s senior notes and exchangeable senior notes and related unpaid accrued interest totaling $7.6 billion were placed into liabilities subject to compromise during the bankruptcy period with respect to the Predecessor as shown in “ Note 3 – Fresh Start Accounting ”.

As of the Petition Date, the Predecessor’s senior and exchangeable senior notes and related unpaid accrued interest totaling $7.6 billion were placed into liabilities subject to compromise during the bankruptcy period with respect to the Predecessor as shown in “Note 3 – Fresh Start Accounting”.

Upon emergence from bankruptcy on December 13, 2019, the Predecessor’s senior and exchangeable senior notes were cancelled pursuant to the terms of the Plan, resulting in a gain on extinguishment of debt of $4.3 billion recognized in “Reorganization Items” on the Consolidated Statements of Operations.

On December 13, 2019, the Effective Date, we issued unsecured 11.00% Exit Notes due in 2024 for an aggregate principal amount of $2.1 billion (of which $500 million was in the form of Exit Takeback Notes to existing creditors on the senior notes being cancelled).

Interest on the Exit Notes will accrue at the rate of 11.00% per annum and will be payable semiannually in arrears on June 1 and December 1, commencing on June 1, 2020.

In the 2019 Predecessor Period, we had net short-term repayments of $347 million primarily from our borrowings and repayments of the DIP Credit Agreement and our Predecessor Revolving Credit Agreements, including the repayment of our 364-Day Credit Agreement.

Interest on the Exit Notes accrues at the rate of 11.00% per annum and is payable semiannually in arrears on June 1 and December 1.

We commenced interest payments thereunder on June 1, 2020.

In the 2019 Predecessor Period, we had net short-term debt repayments of $347 million primarily from our borrowings and repayments of the DIP Credit Agreement and our Predecessor Revolving Credit Agreements, including the repayment of our 364-Day Credit Agreement.

Our long-term debt repayments of $318 million on our Term Loan Agreement and financed leases.

Cash provided by financing activities was $168 million during the Predecessor year ended December 31, 2018.

In February of 2018, we issued $600 million of our 9.875% senior notes due 2025 for net proceeds of $586 million.

We used part of the proceeds from our debt offering to repay in full our 6.00% senior notes due March 2018 and to fund a concurrent tender offer to purchase all of our 9.625% senior notes due 2019.

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Net long- and short-term debt repayments, including the tender offer and borrowings under our revolving credit facilities, in 2018 totaled $378 million.

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In April 2018, we repaid the remaining principal outstanding on an early redemption of the bond.

We recognized a cumulative loss of $34 million on these transactions in “Bond Tender and Call Premium” on the accompanying Consolidated Statements of Operations.

We recognized a cumulative bond tender loss of $34 million on these transactions in “Other Income (Expense)” on the accompanying Consolidated Statements of Operations.

The debt repayments and bond tender premium payments were partially offset by net borrowings primarily under our revolving credit facilities of $158 million.

Other financing activities in 2018 primarily included the costs incurred for the amended Credit Agreements and payments of non-controlling interest dividends.

During 2017, we received net proceeds of approximately $250 million from the June 2017 issuance of our 9.875% senior notes due in 2024.

Long-term debt repayments in 2017 were $69 million .

Net short-term debt repayments of $128 million in 2017 included the repayment of our 6.35% senior notes with a principal balance of $88 million .

Other financing activities in 2017 related primarily to payments of non-controlling interest dividends.

See “ Note 13 – Short-term Borrowings and Other Debt Obligations ” and “ Note 14 – Long-term Debt ” for additional details of our financing activities.

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See “Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings” and “Note 14 – Borrowings and Other Debt Obligations” and “for additional details of our financing activities.

Non-GAAP Free Cash Flow

Non-GAAP Free Cash Flow (“Free Cash Flow”) represents cash flow from operations less capital expenditures (including the acquisition of assets held for sale) plus proceeds from the disposition of assets.

Free cash flow was a positive $78 million and positive $41 million during the 2020 and 2019 Successor Periods and a negative $913 million and negative $353 million during the 2019 and 2018 Predecessor Periods.

Management believes that Free Cash Flow is useful to investors and management as an important liquidity measure of our ability to generate cash, pay obligations and grow the business and shareholder value.

It is a non-GAAP financial measure that should be considered in addition to, not as substitute for or superior to, cash flow from operations.

Sources of Liquidity

Our sources of available liquidity have included cash and cash equivalent balances, accounts receivable factoring, borrowings under credit agreements and cash from dispositions.

As discussed in “ Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings ” and earlier in “ Item 7.

– Management’s Discussion and Analysis of Financial Condition and Results of Operations ”, we believed we would not have sufficient liquidity to satisfy our debt service obligations and meet other financial obligations as they came due and as a result, the Weatherford Parties filed petitions for reorganization under Chapter 11 of the Bankruptcy Code.

During the pendency of the Cases, the DIP Credit Agreement borrowings provided sufficient liquidity for the Company.

Upon emergence, all outstanding obligations under our unsecured senior and exchangeable notes were cancelled and the applicable agreements governing such obligations were terminated;

and our new exit financing included a $2.1 billion aggregate principal amount of unsecured 11.00% Exit Notes, a senior secured asset-based revolving credit agreement in an aggregate amount of $450 million (the “ABL Credit Agreement ” ) and a senior secured letter of credit agreement in an aggregate amount of $195 million (the “LC Credit Agreement”) for issuance of bid and performance letters of credit.

The exit financing repaid the outstanding DIP and A&R Credit Agreements and provide the necessary liquidity to conduct ongoing operations, including the credit lines for letters of credits and working capital needs.

At December 31, 2019, we had available liquidity in excess of $850 million , which is calculated as cash and cash equivalents plus ABL facility availability.

The energy industry faces growing negative sentiment in the market on the ability to access appropriate amounts of capital and under suitable terms.

While we have confidence in the level of support from our lenders, this negative sentiment in the energy industry has not only impacted our customers in North America, it is also affecting the availability and the pricing for most credit lines extended to participants in this industry.

Our sources of available liquidity going forward include cash and cash equivalent balances, cash generated by our operations, accounts receivable factoring, dispositions, and availability under committed lines of credit.

We also historically have accessed banks for short-term loans from uncommitted borrowing arrangements and have accessed the capital markets with debt and equity offerings.

From time to time we may and have entered into transactions to dispose of businesses or capital assets that no longer fit our long-term strategy.

Exit Senior Note, ABL Credit Agreement and LC Credit Agreement

On December 13, 2019, the date of bankruptcy emergence, or the effective date pursuant to the terms of the Plan, we issued unsecured 11.00% Exit Notes due in 2024 for an aggregate principal amount of $2.1 billion (of which $500 million was in the form of a Exit Takeback Notes to existing creditors on the senior notes being cancelled).

Interest on the Exit Notes will accrue at the rate of 11.00% per annum and will be payable semiannually in arrears on June 1 and December 1, commencing on June 1, 2020.

On December 13, 2019, the Company entered into a senior secured asset-based revolving credit agreement in an aggregate amount of $450 million (the “ABL Credit Agreement ” ) with the lenders party thereto and Wells Fargo Bank, N.A.

as administrative agent.

Among other things, proceeds of loans under the ABL Credit Agreement may be used to refinance certain existing indebtedness in connection with the Cases, pay fees and expenses associated with the ABL Credit Agreement and finance ongoing working capital and general corporate needs of the Company and certain of its subsidiaries.

The maturity date of loans made under the ABL Credit Agreement is June 13, 2024.

At December 31, 2019, the Company had no borrowings under the ABL Credit Agreement.

At December 31, 2019, excluding the letters of credit outstanding, availability under the ABL Credit Agreement was in excess of $235 million.

On December 13, 2019, the Company entered into a senior secured letter of credit credit agreement in an aggregate amount of $195 million (the “LC Credit Agreement”, together with the ABL Credit Agreement, the “Exit Credit Agreements”) with the lenders party thereto and Deutsche Bank Trust Company Americas as administrative agent.

The LC Credit Agreement will be used for the issuance of bid and performance letters of credit of the Company and certain of its subsidiaries.

The maturity date under the LC Credit Agreement is June 13, 2024.

The outstanding amount of each letter of credit under the LC Credit Agreement will bear interest at LIBOR plus an applicable margin of 350 basis points per annum.

The LC Credit Agreement includes (i) a 12.5 basis point per annum fronting fee on the outstanding amount of each such letter of credit and (ii) an unused commitment fee in respect of the unutilized commitments at a rate of 50 basis point per annum on the average daily unused commitments under the LC Credit Agreement.

Upon the Effective Date, the Company had approximately $65.8 million in outstanding letters of credit under the LC Credit Agreement.

The LC Credit Agreement has a minimum liquidity covenant of $200 million and is secured by substantially all the personal assets and properties of the Company and certain of its subsidiaries (including a first lien on the priority collateral for the LC Credit

Our sources of available liquidity going forward include cash generated by our operations, cash and cash equivalent balances, accounts receivable factoring, dispositions, and availability under our LC Credit Agreement.

We have aggregate commitments of $215 million under the LC Credit Agreement for the issuance of letters of credit.

At December 31, 2020, we had approximately $167 million in outstanding letters of credit under the LC Credit Agreement and availability of $48 million.

We historically have accessed banks for short-term loans and have accessed the capital markets with debt and equity offerings.

However, the energy industry continues to have negative sentiment in the market which has impacted the ability of energy sector participants to access appropriate amounts of capital and under suitable terms.

Although we may have access to capital markets, it may not be on terms that are commercially acceptable to the Company.

From time to time we may enter into transactions to dispose of businesses or capital assets that no longer fit our long-term strategy.

Exit and Senior Secured Notes and LC Credit Agreement

On December 13, 2019, the date of bankruptcy emergence, we issued unsecured 11.00% Exit Notes due in 2024 for an aggregate principal amount of $2.1 billion (of which $500 million was in the form of a Exit Takeback Notes to existing creditors on the senior notes being cancelled).

Interest on the Exit Notes accrues at the rate of 11.00% per annum and is payable semiannually in arrears on June 1 and December 1.

We commenced interest payments thereunder on June 1, 2020.

Interest of the Senior Secured Notes in 8.75% per annum and is payable semiannually on arrears on March 1 and September 1.

See “Note 14 – Borrowings and Other Debt Obligations” to the Consolidated Financial Statements for further details.

The Company is subject to a $175 million minimum liquidity covenant under our amended LC Credit Agreement and Senior Secured notes and, as defined in the applicable documents, Weatherford had available liquidity of $928 million as of December 31, 2020.

Under our amended LC Credit Agreement, the Company is also subject to a minimum secured liquidity (or cash in controlled accounts) covenant of $125 million.

Our secured liquidity was $779 million at December 31, 2020.

As of December 31, 2020, we were in compliance with the covenants of the indentures governing the Exit Notes and Senior Secured Notes and the LC Credit Agreement.

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Agreement and a second lien on the priority collateral for the ABL Credit Agreement, in each case, subject to permitted liens).

The LC Credit Agreement is also guaranteed on an unsecured basis by certain other subsidiaries of the Company.

As of December 31, 2019 , we were in compliance with these financial covenants as defined in the Exit Credit Agreements and in the covenants under our indentures.

We expect to remain in compliance with all our covenants in 2020.

Should circumstances arise where we are not in compliance with our covenants during any quarterly reporting period, we may have to seek a waiver from our lenders or take measures to reduce indebtedness under the Credit Agreements to a level that would comply with the covenants.

These measures include, among other things, issuing equity, but the proceeds we may be able to generate are limited by the current trading price for our stock and the limited number of shares we have authorized to issue under our governing documents.

Furthermore, if we seek a waiver, we may not be able to obtain a waiver from the required lenders.

Predecessor DIP Credit Agreement, Revolving Credit Agreements and Term Loan Agreement

The DIP Credit Agreement was comprised of the DIP Term Loan and the DIP Revolving Credit Facility.

On July 3, 2019, the Weatherford Parties borrowed approximately $1.4 billion under the DIP Credit Agreement and the proceeds were used to repay certain prepetition indebtedness, cash collateralize certain obligations with respect to letters of credit and similar instruments and financed the working capital needs and general corporate purposes of the Weatherford Parties and certain of their subsidiaries.

On July 3, 2019, the Company repaid all outstanding amounts due under the secured Term Loan Agreement and 364-Day Credit Agreement totaling approximately $616 million with borrowings from our DIP Credit Agreement, leaving only the A&R Credit Agreement with total borrowings of $305 million outstanding at September 30, 2019 to be repaid in full upon emergence from Bankruptcy on the Effective Date under the terms of the RSA.

In addition, we cash collateralized approximately $271 million of letters of credit and similar instruments with borrowings from the DIP Credit Agreement.

See “ Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings ” for additional details regarding interest rates and terms of the DIP Credit Agreement.

The Term Loan Agreement required a quarterly payment of $12.5 million plus interest that became due on June 30, 2019.

On July 1, 2019, the Weatherford Parties and the Term Loan Lenders entered into a Term Loan Forbearance Agreement where the lenders agreed to forbear from exercising their rights and remedies available to them, including the right to accelerate any indebtedness, for a specified period of time.

As mentioned above, on July 3, 2019, the Company repaid in full its outstanding indebtedness under the Term Loan.

The filing of the Cases on July 1, 2019, constituted an event of default that accelerated the Company’s obligations under our credit agreements previously mentioned in “ Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings ”, however forbearance agreements were obtained for each agreement and efforts to enforce payments under these credit agreements were automatically stayed as a result of the Cases.

See “ Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings ” for additional details regarding the Plan and Transaction.

Other Short-Term Borrowings and Debt Activity

We have short-term borrowings with various domestic and international institutions pursuant to uncommitted credit facilities.

At December 31, 2019 , we had $3 million in short-term borrowings under these arrangements.

At December 31, 2019 , the current portion of long-term debt was primarily related to our finance leases.

Ratings Services’ Credit Ratings

On December 16, 2019, after emergence from Chapter 11, S&P Global Ratings assigned us an issuer credit rating of B- from D, with a negative outlook.

S&P assigned a B- for our newly issued Exit Notes and a B+ for both our $450 million ABL revolving credit facility and $195 million letter of credit facility.

Moody’s Investors Service withdrew our credit ratings following the filing of the Plan in Bankruptcy Court in the third quarter of 2019 and resumed rating services after emergence.

Upon emergence, Moody’s assigned us an issuer credit rating of B1, with a stable outlook.

Moody’s assigned a B2 for our newly issued Exit Notes and a Ba2 for both our $450 million ABL revolving credit facility and $195 million letter of credit facility.

As of December 31, 2018, S&P Global Ratings maintained a CCC- rating on our senior unsecured notes, with a negative outlook and our issuer credit rating was CCC.

Moody’s Investors Service maintained a Caa3 credit rating on our senior unsecured notes, with a negative outlook.

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While we expect to continue to have access to credit markets, our non-investment grade status may limit our ability to refinance our existing debt, which could cause us to refinance or issue debt with less favorable and more restrictive terms and conditions, and could increase certain fees and interest of our borrowings.

Suppliers and financial institutions may lower or eliminate the level of credit provided through payment or intraday funding when dealing with us thereby increasing the need for higher levels of cash on hand, which could decrease our ability to repay debt balances, negatively affect our cash flow and impact our access to the inventory and services needed to operate our business.

As of December 31, 2020, our Moody’s Investor Services credit rating on the Senior Secured Notes and our senior secured LC Credit Agreement was Ba3, with a negative outlook.

Our Exit Notes have a credit rating of B3 with a negative outlook.

At December 31, 2020, our S&P credit rating on our Senior Secured Notes and our LC Agreement was B-, with a negative outlook.

The credit rating on our Exit Notes was CCC with a negative outlook.

The ratings from both agencies have been downgraded during 2020 from the ratings assigned at the end of 2019.

While we may continue to have access to credit markets, our credit rating, restrictions under our Exit Notes, Senior Secured Notes and LC agreement, and the industry downturn, could limit our ability to raise capital, refinance our existing debt, or could cause us to refinance or issue debt with less favorable and more restrictive terms and conditions, and could increase certain fees and interest of our borrowings.

Customer Receivables

In weak economic environments, we may experience increased delays and failures to pay our invoices due to, among other reasons, a reduction in our customers ’ cash flow from operations and their access to the credit markets as well as unsettled political conditions.

Given the nature and significance of the COVID-19 pandemic and disruption in the oil and gas industry, we could experience delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies.

Cash Requirements

We anticipate our cash requirements will continue to include payments for capital expenditures, repayment of financed leases, interest payments primarily from on our senior note and Exit Credit Agreements, payments for short-term working capital needs and costs associated with our revenue and cost improvement efforts under our restructuring plans, including severance and professional consulting payments.

Our cash requirements may also include opportunistic debt repurchases, business acquisitions, employee retention programs and awards under our employee incentive programs and other amounts to settle litigation related matters.

We anticipate funding these requirements from cash and cash equivalent balances, availability under our Exit Credit Agreements, accounts receivable factoring and proceeds from disposals of businesses or capital assets that no longer fit our long-term strategy.

In light of the challenging outlook, our capital spending for 2020 is projected to be between $100 - $150 million.

Expenditures are expected to be used primarily to support the ongoing activities of our core business.

If we are unable to generate positive cash flows or access other sources of liquidity described in the previous paragraph, we may need to reduce or eliminate our anticipated capital expenditures in 2020.

Cash and cash equivalents and restricted cash of $799 million at December 31, 2019 , are held by subsidiaries outside of Ireland, the Company’s taxing jurisdiction.

Based on the nature of our structure, we are generally able to redeploy cash with no incremental tax.

As of December 31, 2019 , $8 million of our cash and cash equivalents balance was denominated in Angolan kwanza.

The National Bank of Angola supervises all kwanza exchange operations and has limited U.S.

dollar conversions.

In January 2018, the Angolan National Bank announced a new currency exchange policy and the Angolan kwanza subsequently devalued.

As a result, we recognized currency devaluation charges of $49 million in 2018, primarily for the Angolan kwanza.

Sustained Angolan exchange limitations may continue and has limited our ability to repatriate earnings and exposes us to additional exchange rate risk.

Accounts Receivable Factoring and Other Receivables

From time to time, we participate in factoring arrangements to sell accounts receivable to third-party financial institutions.

During the Successor Period, we sold accounts receivable of $7 million , recognized an insignificant loss and received cash proceeds of $7 million .

In the 2019 Predecessor Period, we sold accounts receivable of $199 million , recognized a loss of $1 million and received cash proceeds of $186 million .

For the full year 2019, we sold a total combined amount of accounts receivable of $206 million , recognized a loss of $1 million and received cash proceeds totaling $193 million on these sales.

In 2018 , we sold accounts receivables of $382 million , recognized a loss of $2 million and received cash proceeds totaling $373 million on these sales.

In 2017 , we sold accounts receivables of $227 million , recognized a loss of $1 million and received cash proceeds totaling $223 million on these sales.

Our cash requirements will continue to include interest payments on our long-term debt, payments for capital expenditures, repayment of financed leases, payments for short-term working capital needs and costs associated with our revenue and cost improvement efforts under our restructuring plans, including severance payments.

Our cash requirements may also include awards under our employee incentive programs and other amounts to settle litigation related matters.

We anticipate funding these requirements from cash and cash equivalent balances, accounts receivable factoring and proceeds from disposals of businesses or capital assets that no longer fit our long-term strategy.

As of December 31, 2020, we had approximately $2.6 billion of long-term debt with $2.1 billion in aggregate principal amount maturing on December 1, 2024 and $500 million in aggregate principal amount maturing on September 1, 2024.

We expect to have interest payments of approximately $275 million annually until the maturity of our senior notes.

Please see “Note 14 – Borrowings and Other Debt Obligations” for additional details.

Our payments on operating leases and purchase obligations, including capital expenditures in the upcoming year are expected to be approximately $91 million and $364 million, respectively.

See “Note 13 – Leases” for details of our lease obligations by year.

Our capital spending for 2021 is projected to be approximately $140 million.

Capital expenditures are expected to be used primarily to support the ongoing activities and commitments in our core business.

Cash and cash equivalents (including restricted cash of $167 million primarily related to cash collateral on our letters of credit) totaled $1.3 billion at December 31, 2020, and are held by subsidiaries outside of Ireland, our taxing jurisdiction.

At December 31, 2020 we had approximately $160 million of our cash and cash equivalents that cannot be immediately repatriated from various countries due to country central bank controls or other regulations.

Based on the nature of our structure, other than the restrictions noted above, we are generally able to redeploy cash with minimal or no incremental tax.

Accounts Receivable Factoring

From time to time, we participate in factoring arrangements to sell accounts receivable to third-party financial institutions for cash proceeds net of discount and hold-back.

The programs we factor under are uncommitted and thus we cannot assure they will be available as a source of liquidity.

During the 2020 Successor Period, we sold accounts receivable balances of $90 million and received cash proceeds of $79 million.

During the 2019 Combined Period, we sold accounts receivable of $206 million and received cash proceeds of $193 million.

In 2018, we sold accounts receivables of $382 million and received cash proceeds of $373 million.

Our factoring transactions were recognized as sales, and the proceeds are included as operating cash flows in our Consolidated Statements of Cash Flows.

In the first quarter of 2017, we converted trade receivables of $65 million into a note from a customer with a face value of $65 million .

The note had a three -year term at a 4.625% stated interest rate.

During the second quarter of 2017, we sold the note for $59 million .

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Contractual Obligations

The following summarizes our contractual obligations and contingent commitments by period.

The obligations we pay in future periods may vary due to certain assumptions including the duration of our obligations and anticipated actions by third parties.

Payments Due by Period

(Dollars in millions)

Short-term Debt

Long-term Debt (a)

Interest on Long-term Debt

Operating Leases

Purchase Obligations

Amounts represent the expected cash payments of principal associated with our long-term debt.

Due to the uncertainty with respect to the timing of future cash flows associated with our uncertain tax positions, we are unable to make reasonably reliable estimates of the period of cash settlement, if any, to the respective taxing authorities.

Therefore, $290 million in uncertain tax positions, including interest and penalties, have been excluded from the contractual obligations table above.

We have defined benefit pension and other post-retirement benefit plans covering certain of our U.S.

and international employees.

During 2019 , we made contributions and paid direct benefits of approximately $5 million in connection with those plans and we anticipate funding approximately $5 million during 2020 .

Our projected benefit obligations for our defined benefit pension and other post-retirement benefit plans were $198 million as of December 31, 2019 .

Derivative Instruments

Warrant - Predecessor

During the fourth quarter of 2016, in conjunction with the issuance of 84.5 million ordinary shares, we issued a warrant that gives the holder the option to acquire an additional 84.5 million ordinary shares.

The exercise price on the warrant was $6.43 per share and was exercisable prior to May 21, 2019.

The option period lapsed and the warrants expired unexercised with a fair value of zero .

The warrant was classified as a liability and carried at fair value on the Consolidated Balance Sheets and changes in the fair value were reported through earnings.

The fair value of the warrant was nil at December 31, 2018 .

The change in fair value of the warrant during 2018 was primarily driven by eliminating the warrant share value associated with any future equity issuance and a decrease in Weatherford’s stock price.

See “ Note 16 – Derivative Instruments ” for information related to the warrant.

The warrant fair value was a Level 2 valuation and is estimated using the Black Scholes valuation model.

Inputs to the model include Weatherford’s share price, volatility of our share price, and the risk-free interest rate.

The fair value of the warrant was nil at December 31, 2018 .

We recognized an insignificant gain in May 2019 related to the warrant expiration.

We recognized a gain of $70 million and $86 million in 2018 and 2017, respectively, with changes in fair value of the warrants recorded each period in “ Warrant Fair Value Adjustment ” on the accompanying Condensed Consolidated Statements of Operations .

The change in fair value of the warrant during 2017 was principally due to a decrease in the Predecessor’s stock price.

Fair Value Hedges

We may use interest rate swaps to help mitigate exposures related to changes in the fair values of fixed-rate debt.

See “ Note 16 – Derivative Instruments ” to our Consolidated Financial Statements for additional details.

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Cash Flow Hedges

We may use interest rate swaps to mitigate our exposure to variability in forecasted cash flows due to changes in interest rates.

In 2008, we entered into interest rate derivative instruments to hedge projected exposures to interest rates in anticipation of a debt offering.

These hedges were terminated at the time of the issuance of the debt, and the associated loss is being amortized from “ Accumulated Other Comprehensive Income (Loss) ” to interest expense over the remaining term of the debt.

As of December 31, 2019 and 2018 , we had net unamortized losses of zero and $8 million , respectively, associated with our cash flow hedge terminations.

As of December 31, 2019 , we did not have any cash flow hedges designated.

Other Derivative Instruments

We enter into contracts to hedge our exposure to currency fluctuations in various foreign currencies.

At December 31, 2019 and 2018 , we had outstanding foreign currency forward contracts with notional amounts aggregating to $389 million and $435 million , respectively.

At December 31, 2020 and December 31, 2019, we had outstanding foreign currency forward contracts with notional amounts aggregating to $337 million and $389 million, respectively.

The notional amounts of our foreign currency forward contracts do not generally represent amounts exchanged by the parties and thus are not a measure of the cash requirements related to these contracts or of any possible loss exposure.

The amounts actually exchanged at maturity are calculated by reference to the notional amounts and by other terms of the derivative contracts, such as exchange rates.

See “ Note 16 – Derivative Instruments ” for additional information.

Our foreign currency derivatives are not designated as hedges under ASC 815, and the changes in fair value of the contracts are recorded in each period in “Other Income (Expense), Net” on the accompanying Consolidated Statements of Operations.

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Weatherford International plc, a public limited company organized under the laws of Ireland, and as the ultimate parent of the Weatherford group, guarantees the obligations of its subsidiaries – Weatherford International Ltd., a Bermuda exempted company (“Weatherford Bermuda”), and Weatherford International, LLC, a Delaware limited liability company (“Weatherford Delaware”), including the notes and credit facilities listed below.

On August 28, 2020, Weatherford International Ltd., as issuer, Weatherford International plc and Weatherford International, LLC, as guarantors, and the other subsidiary guarantors party thereto, entered into an indenture with Wilmington Trust, National Association, as trustee and collateral agent, and issued the 8.75% Senior Secured Notes due September 1, 2024 in an aggregate principal amount of $500 million.

On December 13, 2019, the date of bankruptcy emergence, or the effective date pursuant to the terms of the Plan, we issued unsecured 11.00% Exit Notes due December 1, 2024 of Weatherford Bermuda guaranteed by Weatherford Delaware for an aggregate principal amount of $2.1 billion.

Upon emergence from bankruptcy on December 13, 2019, the Predecessor’s senior and exchangeable senior notes, and guarantees under these instruments, were cancelled pursuant to the terms of the Plan.

In addition, we repaid in full the Predecessor’s A&R Credit Agreement and Term Loan pursuant to the terms of the plan.

See “ Note 3 – Fresh Start Accounting and Note 14 – Long-term Debt ” for additional details related to our financial restructuring.

Letters of Credit and Performance and Bid Bonds

We use letters of credit and performance and bid bonds in the normal course of our business.

As of December 31, 2019 , we had $399 million of letters of credit and performance and bid bonds outstanding, consisting of $ 141 million of letters of credit under the ABL Credit Agreement, $105 million of letters of credit under the LC Credit Agreement and $153 million of letters of credit under various uncommitted facilities.

At December 31, 2019, we had cash collateral of $152 million supporting letters of credit under our various uncommitted facilities.

The cash is included in “Restricted Cash” in the accompanying Consolidated Balance Sheets .

Upon emergence from bankruptcy on December 13, 2019, the Predecessor’s senior notes, exchangeable senior notes, and guarantees under these instruments, were cancelled pursuant to the terms of the Plan.

In addition, we repaid in full the Predecessor’s Amended and Restated Credit Agreement and Term Loan pursuant to the terms of the Plan.

See “Note 3 – Fresh Start Accounting” for additional details related to our financial restructuring.

Letters of Credit and Surety Bonds

As of December 31, 2020, we had $338 million of letters of credit outstanding, consisting of $167 million under the LC Credit Agreement and $171 million under various uncommitted facilities (of which there was $164 million in cash collateral held and recorded in “Restricted Cash” on the Consolidated Balance Sheets).

In Latin America we utilize surety bonds as part of our customary business practice.

These obligations could be called by the beneficiaries should we breach certain contractual or performance obligations.

If the beneficiaries were to call the letters of credit under our committed facilities, our available liquidity would be reduced by the amount called and it could have an adverse impact on our business, operations and financial condition.

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As of December 31, 2020, we had surety bonds outstanding of $326 million, primarily in Latin America.

Any of our outstanding letters of credit or surety bonds could be called by the beneficiaries should we breach certain contractual or performance obligations.

If the beneficiaries were to call the letters of credit under our LC Credit Agreement or surety bonds, our available liquidity would be reduced by the amount called.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operation is based upon our Consolidated Financial Statements.

We prepare these financial statements in conformity with U.S.

As such, we are required to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented.

We base our estimates on historical experience, available information and various other assumptions we believe to be reasonable under the circumstances.

We prepare these consolidated financial statements in conformity with U.S.

As such, we are required to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented.

We base our estimates on historical experience and available information and various other assumptions we believe to be reasonable under the circumstances.

On an on-going basis, we evaluate our estimates;

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Fresh Start Accounting

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On the Effective Date in 2019, we adopted and applied the relevant guidance with respect to the accounting and financial reporting for entities that have emerged from bankruptcy proceedings, or “Fresh Start Accounting.” Under Fresh Start Accounting, our balance sheet on the Effective Date reflects all of our assets and liabilities at fair value.

Our emergence from bankruptcy and the adoption of Fresh Start Accounting resulted in a new reporting entity, referred to herein as the “Successor,” for financial reporting purposes.

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Allocation of Reorganization Value under Fresh Start Accounting

We allocated the reorganization value under Fresh Start Accounting to the Company’s identifiable tangible and intangible assets and liabilities based on estimated fair values.

Upon emergence on December 13, 2019, we allocated the reorganization value under Fresh Start Accounting to the Company’s identifiable tangible and intangible assets and liabilities based on estimated fair values.

The excess of the reorganization value over the amount allocated to the assets and liabilities was recorded as goodwill.

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The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations.

Successor goodwill represents the excess of reorganization value over the fair value of our identifiable tangible and intangible assets and liabilities as of December 13, 2019 and was allocated to our Middle East/North Africa and Russia reporting units.

Predecessor goodwill represented the excess of consideration paid over the fair value of net tangible and identifiable intangible assets acquired and liabilities assumed in a business combination.

Predecessor goodwill was allocated to Weatherford’s reporting units when initially acquired.

Reporting units are operating segments or one level below the operating segment level.

Our Predecessor reporting units are based on our regions and include North America, Latin America, Europe and Sub-Sahara Africa, Russia/China, Middle East/North Africa, and Asia.

Goodwill is not amortized but is evaluated for impairment.

We perform an impairment test for goodwill annually as of October 1 or more frequently if indicators of potential impairment exist that would more-likely-than-not reduce the fair value of the reporting unit below its carrying value.

We have the option to assess qualitative factors to determine if it is necessary to perform the quantitative goodwill impairment test.

If it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value, we must perform the quantitative goodwill impairment test.

We also have the unconditional option to bypass the qualitative assessment at any time and perform the quantitative step.

The quantitative step of the goodwill impairment test involves a comparison of the fair value of each of our reporting units with their carrying values.

An impairment reflects the overall decline in the fair value of the reporting unit.

For Successor goodwill, based on our goodwill impairment assessment performed as of December 31, 2019, no goodwill impairments were deemed necessary.

We recognized goodwill impairment of $730 million in the Predecessor Period and $1.9 billion in the period ending December 31, 2018.

Our cumulative impairment loss for goodwill was $3.4 billion at December 13, 2019.

The impairments recognized in 2019 and 2018 were a result of lower activity levels and lower exploration and production capital spending that resulted in a decline in drilling activity and impacted our forecasted growth in all our reporting units.

As a result of Fresh Start Accounting on December 13, 2019, we recognized and allocated $239 million of goodwill to our MENA and Russia reporting units and have presented that amount as of December 31, 2019 as Successor goodwill, which represents the excess of reorganization value over the fair value of our identifiable tangible and intangible assets and liabilities.

During the first and second quarters of 2020, the unprecedented global economic and industry conditions resulting from the decline in demand and impact from the COVID-19 pandemic were identified as goodwill and long-lived asset impairment indicators or triggering events.

We identified lower exploration and production capital spending that resulted in lower drilling and forecasted activity.

We performed interim quantitative goodwill assessment as of March 31, 2020 and June 30, 2020 as described in “Note 11 – Goodwill and Intangible Assets” to our Consolidated Financial Statements.

The fair values of these two reporting units were determined using a combination of the income approach and the market approach for comparable companies in our industry, a Level 3 fair value analysis.

Determining the fair value of the reporting units requires management to exercise significant judgments, including estimating the discounted future cash flows by reporting unit, specifically the forecasted revenue, forecasted operating margins and discount rates.

Goodwill impairment occurs when the carrying amount of a reporting unit exceeds the fair value.

We determined that the fair value of these reporting units were less than their carrying values, as a result of our impairment tests, we fully impaired our goodwill in the MENA and Russia reporting units as presented in “Impairments and Other Charges” on the accompanying Consolidated Statements of Operations.

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lower than expected and forecasted financial results were due to the continued weakness within the energy market and consequently our inability to achieve revenue and profit improvements.

When we conducted our impairment evaluation, we considered macroeconomic and industry conditions, including the outlook for exploration and production spending by our customers and overall financial performance of each of our reporting units.

We also considered whether there were any changes in our long-term forecasts, which are impacted by assumptions about the future commodity pricing and supply and demand for our goods and services.

For the quantitative assessment in the Predecessor Periods, the fair values of our reporting units were determined using a combination of the income approach and the market approach and then we applied an appropriate weighting of the values from each method.

The income approach estimates fair value by discounting the reporting unit’s estimated future cash flows.

The income approach requires us to make certain estimates and judgments.

To arrive at our future cash flows, we use estimates of economic and market information, including growth rates in revenues and costs, working capital and capital expenditure requirements, and operating margins and tax rates.

Several of the assumptions used in our discounted cash flow analysis were based upon a financial forecast.

This process takes into consideration many factors including historical results and operating performance, related industry trends, pricing strategies, customer analysis, operational issues, competitor analysis, and marketplace data, among others.

Assumptions were also made for periods beyond the financial forecast period.

The discount rate used in the income approach was determined using a weighted average cost of capital and reflected the risks and uncertainties in our cash flow estimates.

The weighted average cost of capital includes a cost of debt and equity.

The cost of equity was estimated using the capital asset pricing model, which included inputs for a long-term risk-free rate, equity risk premium, country risk premium, and an asset beta appropriate for the assets in the reporting unit.

We engaged an independent valuation specialist to assist us in our valuations under both valuation methods.

For further analysis and discussion of goodwill refer to “ Item 8.

– Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 10 – Goodwill and Intangible Assets ” of this Form 10-K.

Long-Lived Assets

Long-lived assets, which include PP&E and definite-lived intangibles, comprise a significant amount of our assets.

We must make estimates about the expected useful lives of the assets.

The value of the long-lived assets is then amortized over its expected useful life.

Long-lived assets, which include PP&E, definite-lived intangibles and right of use assets, comprise a significant amount of our assets.

We make estimates about their expected useful lives.

The cost of the long-lived assets is then amortized over its expected useful life.

A change in the estimated useful lives of our long-lived assets would have an impact on our results of operations.

We estimate the useful lives of our long-lived asset groups as follows:

Estimated Useful Lives

Asset Category Estimated Useful Lives

Buildings and Leasehold I mprovements

10 – 40 years or lease term

Rental and Service Equipment

2 – 15 years (3 – 10 years for assets added after emergence)

Machinery and Other

Intangible Assets

Rental and Service Equipment 3 – 10 years

Machinery and Other 2 – 12 years

Intangible Assets 5 – 10 years

In estimating the useful lives of our property, plant and equipment, we rely primarily on our actual experience with the same or similar assets.

The useful lives of our intangible assets are determined by the years over which we expect the assets to generate a benefit based on legal, contractual or regulatory terms.

Long-lived assets to be held and used by us are reviewed to determine whether any events or changes in circumstances indicate that we may not be able to recover the carrying amount of the asset.

Factors that might indicate a long-lived asset may not be recoverable may include, but are not limited to, significant decreases in the market value of the long-lived asset, a significant change in the long-lived asset’s physical condition, the introduction of competing technologies, legal challenges, a reduction in the utilization rate of the assets, a change in industry conditions, or a reduction in cash flows driven by pricing pressure as a result of oversupply associated with the use of the long-lived asset.

If these or other factors exist that indicate the carrying amount of the asset may not be recoverable, we determine whether an impairment has occurred through the use of an undiscounted cash flow analysis.

The undiscounted cash flow analysis consists of estimating the future cash flows that are directly associated with, and are expected to arise from, the use and eventual disposition of the asset over its remaining useful life.

These cash flows are inherently subjective and require estimates based upon historical experience and future expectations.

If the undiscounted cash flows do not exceed the carrying value of the long-lived asset, the asset is not recoverable and impairment is recognized to the extent the carrying amount exceeds the estimated fair value of the asset.

The fair value of the asset is measured using market prices, or in the absence of market prices, is based on an estimate of discounted cash flows.

Long-lived assets to be held and used by us are reviewed to determine whether any events or changes in circumstances indicate that we may not be able to recover the carrying amount of the asset or asset group.

Factors that might indicate a long-lived asset or asset group may not be recoverable may include, but are not limited to, significant decreases in the market value of the long-lived asset, a significant change in the long-lived asset’s physical condition, the introduction of competing technologies, legal challenges, a reduction in the utilization rate of the assets, a change in industry conditions, or a reduction in cash flows driven by pricing pressure as a result of oversupply associated with the use of the long-lived asset.

The Company groups individual assets at the lowest level of identifiable cash flows and performs an undiscounted cash flow analysis to identify assets or asset groups that may not be recoverable.

If the undiscounted cash flows do not exceed the carrying value of the long-lived asset group, the asset group is not recoverable and impairment is recognized to the extent the carrying amount exceeds the estimated fair value of the asset group.

A fair value assessment is performed on assets or asset groups identified as not being recoverable using a discounted cash flow analysis to determine if an impairment has occurred.

If an impairment has occurred, the Company recognizes a loss for the difference between the carrying amount and the fair value of the asset or asset group.

The discounted cash flow analysis consists of estimating the future cash flows that are directly associated with, and are expected to arise from, the use and eventual disposition of the asset over its remaining useful life.

These estimated discounted cash flows are inherently subjective and includes significant assumptions, specifically the forecasted revenue, forecasted operating margins, and the discount rate assumptions and require estimates based upon historical experience and future expectations.

The fair value of the asset or asset group is measured using market prices, or in the absence of market prices, is based on an estimate of discounted cash flows.

Cash flows are discounted at an interest rate commensurate with our weighted average cost of capital for a similar asset.

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Assets are grouped at the lowest level at which cash flows are identifiable and independent.

We generally group operating assets by product line of the respective region.

We have long-lived assets, such as facilities, utilized by multiple operating divisions that do not have identifiable cash flows and impairment testing for these long-lived assets is based on the consolidated entity.

We recognized long-lived asset impairments of $20 million for the Predecessor Period ended December 13, 2019 to write-down our assets to the lower of carrying amount or fair value less cost to sell for our land drilling rigs.

We had asset write-downs of $91 million for assets where there was low or no demand.

The long-lived asset impairments in 2019 were primarily related to our Western Hemisphere segment totaling $13 million and Eastern Hemisphere totaling $7 million .

During the second quarter of 2019, we reclassified our remaining land drilling rigs assets back into held for use.

The unprecedented global economic and industry conditions resulting from the decline in demand and impact from the COVID-19 pandemic were identified as impairment indicators.

Based on our impairment tests, we determined the carrying amount of certain long-lived asset groups exceeded their respective fair values and we recognized of long-lived asset impairments in “Impairments and Other Charges” on the accompanying Consolidated Statements of Operations during the year ended December 31, 2020.

See “Note 10 – Long-Lived Asset Impairments”, “Note 11 – Goodwill and Intangible Assets” and “Note 15 – Fair Value of Financial Instruments, Assets and Other Assets” for additional information regarding the impairment and the fair value determination used in the impairment calculation.

The fair values of our long-lived assets were determined using discounted cash flow or Level 3 fair value analyses.

The unobservable inputs to the income approach included the estimated discounted future cash flows by asset group and significant

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assumptions, specifically the forecasted revenue, forecasted operating margins, and discount rate assumptions used to determine the fair value of certain asset groups.

The 2019 impairments were due to the sustained downturn in the oil and gas industry that resulted in us having to reassess our disposal groups for our land drilling rigs.

The Level 3 fair values of the long-lived assets were determined using a combination of the market and income approach.

The Level 3 fair values of the long-lived assets were determined using a combination of the market approach and the income approach.

The market approach considered market sales values for similar assets.

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See “Note 15 – Fair Value of Financial Instruments, Assets and Other Assets” for additional information regarding the fair value determination used in the impairment calculation.

During 2018, we recognized long-lived asset impairments of $151 million , of which $141 million ( $43 million in our Western Hemisphere segment and $98 million in our Eastern Hemisphere segment) was to write-down our land drilling rigs assets to the lower of carrying amount or fair value less cost to sell and the remaining $10 million ( $3 million was in our Western Hemisphere and $7 million is in our Eastern Hemisphere segment) of charges were for land drilling rigs assets charges not in held for sale.

See “ Note 7 – Business Combinations and Divestitures ” for more details.

The 2018 impairments were due to the sustained downturn in the oil and gas industry that resulted a reassessment of our disposal groups for our land drilling rigs.

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See “Note 15 – Fair Value of Financial Instruments, Assets and Other Assets” for additional information regarding the fair value determination used in the impairment calculation.

In the fourth quarter of 2017, we recognized long-lived asset impairment charges of $928 million , of which $923 million was related to PP&E impairments and $5 million was related to the impairment of intangible assets.

The fourth quarter 2017 PP&E impairment charges were primarily in our Eastern Hemisphere segment in the amount of $740 million related to the write-down to the lower of carrying amount or fair value less cost to sell of our land drilling rigs assets classified as held for sale, PP&E impairment charges related to our product lines of $135 million in the Western Hemisphere segment and $37 million in the Eastern Hemisphere segment.

In addition, we recognized $11 million of long-lived impairment charges related to Corporate assets.

The long-lived assets impairment charges were due to the prolonged downturn in the oil and gas industry, whose recovery in the third quarter was not as strong as expected and whose recovery in the fourth quarter of 2017 was slower than we had previously been anticipated.

The decline and its impact on demand represent a significant adverse change in the business climate and an indication that some of our long-lived assets may not be recoverable.

Based on the impairment indicators noted we performed an analysis of our long-lived assets in 2020, 2019 and 2018 and recorded long-lived and other asset impairment charges to adjust to fair value.

See “ Note 9 – Long-Lived Asset Impairments and Asset Write-Downs ” for additional information regarding the long-lived assets impairment.

See “Note 10 – Long-Lived Asset Impairments” for additional information regarding the long-lived assets impairment.

Management cannot predict the occurrence of future impairment-triggering events, so we continue to assess whether indicators of impairment to long-lived assets exist due to the current business conditions in the oilfield services industry.

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Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected

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to be recovered or settled.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

In 2019, the income tax provision was $9 million in the Successor Period and $135 million during the Predecessor Period as compared to a tax provision of $34 million in 2018 and $137 million in 2017, respectively, which resulted in an effective tax rate of (60)% , 3% , (1)% and (5)% , respectively.

Our 2019 effective tax rate was driven by tax expense due to profits in certain jurisdictions, deemed profit countries, withholding taxes on intercompany and third-party transactions, and the tax impact of Fresh Start accounting.

See “Note 18 – Income Taxes” for detailed discussion of results.

We recognize the impact of an uncertain tax position taken or expected to be taken on an income tax return in the financial statements at the largest amount that is more likely than not to be sustained upon examination by the relevant taxing authority.

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We recognize potential liabilities and record tax liabilities for anticipated tax audit issues in the tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due.

As of December 31, 2019, we had recorded reserves for uncertain tax positions of $214 million , excluding accrued interest and penalties of $77 million .

The tax liabilities are reflected net of realized tax loss carryforwards.

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Changes in tax laws, regulations, agreements and treaties, foreign currency exchange restrictions or our level of operations or profitability in each taxing jurisdiction could have an impact upon the amount of income taxes that we provide during any given year.

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Valuation Allowance for Deferred Tax Assets

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however, when the likelihood of the realization of existing deferred tax assets changes, adjustments to the valuation allowance are charged to our income tax provision in the period in which the determination is made.

As of December 31, 2019 , our deferred tax assets were $1.3 billion before a related valuation allowance of $1.2 billion .

As of December 31, 2018 , our deferred tax assets were $1.8 billion before a related valuation allowance of $1.7 billion .

The deferred tax assets were also offset by deferred tax liabilities of $121 million and $124 million as of December 31, 2019 and 2018, respectively.

The decrease in the valuation allowance from 2018 to 2019 was primarily driven by the tax impact of the gain on Settlement of Liabilities Subject to Compromise and Fresh Start Accounting, which included the reduction of our U.S.

unbenefited net operating losses carryforward under the operative tax statute and applicable regulations offset by the release of the valuation allowance.

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Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts in order to record accounts receivable at their net realizable value.

The Company concluded it was not able to realize the benefits of its deferred tax assets and has established a valuation allowance.

Our valuation allowance on our deferred tax assets was $1.5 billion at December 31, 2020.

Allowance for Credit Losses

On January 1, 2020, we adopted Financial Accounting Standards Board Accounting Standards Update No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss impairment methodology in previous U.S.

GAAP with a methodology (Current Expected Credit Losses model, or CECL) that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates.

We estimate expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

Our customer base has generally similar collectability risk characteristics, although risk profiles can vary between larger independent customers and state-owned customers, which may have a lower risk than smaller independent customers.

We maintain an allowance for credit losses in order to record accounts receivable at their net realizable value.

Significant judgment is involved in recognizing this allowance.

The determination of the collectability requires us to use estimates and make judgments regarding future events and trends, including monitoring our customers’ payment history and current creditworthiness to determine that collectability is reasonably assured, as well as consideration of the overall business and political climate in which our customers operate.

Provisions for doubtful accounts are recorded when it becomes evident that customer accounts are uncollectible.

The allowance in “Accounts Receivable, Net of Allowance for Uncollectible Account” was zero as of December 31, 2019 due to Fresh Start Accounting.

For the year ended December 31, 2018, the allowance for accounts receivable was $123 million , or 10% , over total gross accounts receivable.

In the 2019 Predecessor Period, and the years ended December 31, 2018 and 2017, we recognized bad debt expense of $4 million , $5 million and $238 million , respectively.

In the second quarter of 2017, we changed the accounting for revenue with our primary customer in Venezuela and reclassified net accounts receivable for this customer as a net long-term receivable.

In the fourth quarter of 2017, we changed the accounting for revenue with substantially all of our customers in Venezuela due to the downgrade of the country’s bonds by certain credit agencies, continued significant political and economic turmoil and continued economic sanctions around certain financing transactions imposed by the U.S.

In connection with this development, we recorded a charge of $230 million fully reserving our receivables for these customers in Venezuela.

The long-term allowance related to our primary customer in Venezuela was zero and $171 million as of December 31, 2019 and December 31, 2018.

We believe that our allowance for doubtful accounts is adequate to cover bad debt losses under current conditions.

The determination of the collectability requires us to use estimates and make judgments regarding future events and trends, including monitoring our customers’ payment history and current creditworthiness, as well as consideration of the overall business and political climate in which our customers operate.

The allowance for credit losses in “Accounts Receivable, Net of Allowance for Credit Losses” was $32 million, or 4%, over total gross accounts receivable as of December 31, 2020 and was zero as of December 31, 2019 due to Fresh Start Accounting.

We believe that our allowance for credit loss is adequate to cover bad debt losses under current conditions.

However, uncertainties regarding changes in the financial condition of our customers, either adverse or positive, could impact the amount and timing of any additional provisions for doubtful accounts that may be required.

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This review requires us to make judgments regarding potential future outcomes.

At December 31, 2019 our inventory reserve was zero due to Fresh Start Accounting and remeasuring our inventory to fair value upon emergence from bankruptcy on December 13, 2019.

Refer to Note 3 – Fresh Start Accounting for further details.

At December 31, 2018 , inventory reserves represented 23% of gross inventory.

During 2019 , 2018 and 2017, we recognized inventory write-off and other related charges, including excess and obsolete inventory charges totaling $159 million and $80 million and $540 million , respectively.

These charges were largely attributable to the downturn in the oil and gas industry, where certain inventory has been deemed commercially unviable or technologically obsolete considering current and future demand.

We believe that our reserves are adequate to properly value excess, slow-moving and obsolete inventory under current conditions.

Our estimates in 2020 included assessing the impact of the COVID-19 pandemic and the resulting impact to our business forecast.

Our assessment of our inventory specifically identified inventory in which we could not forecast demand and excess and obsolete inventory.

At December 31, 2020, inventory reserves of $119 million represented 14% of gross inventory and we had no reserves at December 31, 2019 as a result of fresh start accounting.

We believe that our inventory reserves as of December 31, 2020 are adequate to properly state inventory at the lower of cost or net realizable value.

See “Note 7 – Inventories, Net” for further details.

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Disputes, Litigation and Contingencies

As of December 31, 2019 , we have accrued an estimate of the probable and estimable cost to resolve certain legal and investigation matters.

For matters not deemed probable and reasonably estimable, we have not accrued any amounts in accordance with U.S.

Our legal department manages all pending or threatened claims and investigations on our behalf.

The estimate of the probable costs related to these matters is developed in consultation with internal and outside legal counsel.

Our contingent loss estimates are based upon an analysis of potential results, assuming a combination of probable litigation and settlement strategies.

The accuracy of these estimates is impacted by the complexity of the issues.

Whenever possible, we attempt to resolve these matters through settlements, mediation and arbitration proceedings if advantageous to the company.

If the actual settlement costs, final judgments or fines differ from our estimates, our future financial results may be adversely affected.

For a more comprehensive discussion, see “ Note 19 – Disputes, Litigation and Legal Contingencies .”

We lease certain facilities, land, vehicles, and equipment.

Leases with an initial term of 12 months or less (“short-term leases”) are not recorded on the balance sheet (including short-term sale leaseback transactions);

we recognize lease expense for these leases on a straight-line basis over the lease term.

Beginning January 1, 2019, operating right of use (“ROU”) assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date.

Operating leases in effect prior to January 1, 2019 were recognized at the present value of the remaining payments on the remaining lease term as of January 1, 2019.

We determine if an arrangement is classified as a lease at inception of the arrangement.

As most of our leases do not provide an implicit rate of return, we use our incremental borrowing rate, together with the lease term information available at commencement date of the lease, in determining the present value of lease payments, which is updated on a quarterly basis.

For adoption of Topic 842 we used the December 31, 2018 incremental borrowing rate, for operating leases that commenced prior to December 31, 2018.

For certain equipment leases, such as copiers and vehicles, we account for the leases under a portfolio method.

Operating lease payments include related options to extend or terminate lease terms that are reasonably certain of being exercised.

Upon emergence from bankruptcy on December 13, 2019, our lease liabilities were remeasured to fair value using the present value of the remaining lease payments as if Weatherford acquired new leases.

The remeasurement was based on our incremental borrowing rate as of December 13, 2019.

Additionally, the ROU assets were revalued based upon the present value of market-based rent.

The remeasurement of our ROU assets was based on the real estate market discount rate as of December 13, 2019.

See “ Note 4 – New Accounting Pronouncements ” and “ Note 12 – Leases ” for details on the impact of adoption of the new revenue recognition guidance and our revenue recognition policies.

New Accounting Pronouncements

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Item 7. Management’s Discussion and Analysis